The demise of the Celtic Tiger has become a much-talked about topic of conversation in recent months. While the extraordinary boom conditions of recent years are unlikely to be ever repeated again, there is some evidence that the tiger economy is merely taking a breather.

An example of this is the recent financial results statement from Anglo Irish Bank covering the 12-months to end September. These were a powerful set of figures that highlighted how a well-positioned company such as Anglo Irish has been able to cash in on the booming Irish economy.

Total loans grew by more than 40 per cent year-on-year and there was a commensurate rise in profitability, with profit before tax rising by 42 per cent.

The quality of Anglo Irish's loan book is high and, as yet, there is no evidence of any deterioration in the situation regarding bad loans. This is a far cry from the 1980s when Anglo Irish was a tiny player trying to grow in a much tougher economic climate.

Historically, the bank has concentrated on lending to the small business and property-related sectors. Typically, this involves higher risks but net interest margins, and hence profitability, will generally be higher.

Throughout the 1980s, Anglo Irish found it had to regularly go to the stock market to raise new capital. Economic recession and the currency crisis of the early 1990s left the company very exposed to rising bad debts within the sectors that it concentrated on, such as pubs and smaller property developments.

However, the very factors that meant that Anglo Irish was viewed as a small and somewhat risky bank have been key in enabling it to be the prime beneficiary of the Celtic Tiger.

During the boom times, the sectors that Anglo Irish focuses on - pubs, hotels, and small and medium-sized businesses - are the ones that have generated the most attractive and profitable lending opportunities.

Anglo Irish's lending growth has been nothing short of phenomenal. At end-September 1998 loans stood at €3.5 billion (£2.7 billion) and have trebled in the three years to September 2001, when the loan book stood at more than €11 billion.

Most of this growth has been generated in the Republic, as can be seen from the accompanying table. In the year to September 2001, the Irish loan book grew 34 per cent to €6.4 billion.

Growth in Anglo Irish's overseas activities was also driven rapidly by the bank's desire to broaden its geographical diversification.

Such rapid growth obviously brings with it rising costs to pay for the additional resources to service the extra business.

Costs rose rapidly in the period under review but at a lower pace than revenue growth - 33 per cent versus 40 per cent. Hence, Anglo Irish's cost/income ratio fell to 30.8 per cent - one of the lowest rates in Europe.

Despite the slowdown in the Irish economy, loan growth at Anglo Irish remains very healthy. The pace of growth has slowed but continues to outstrip that of the larger banks by a wide margin. Anglo Irish's pipeline of new lending remains very strong, with commitments to lend rising by 44 per cent since March to a level of more than €2 billion.

The big risk to any bank that grows its lending book very rapidly is a sudden deterioration in asset quality. If a significant number of loans go bad the impact on overall profitability can be disastrous.

The next six to 12 months will be the acid test of Anglo Irish's business model. If the Irish economy suffers from a serious recession it is highly likely that the bank's bad-debt experience would be worse than that of its larger rivals. On the positive side, interest rates are very low and are likely to go even lower.

To a significant degree, Anglo Irish may be viewed as a geared investment in the Irish economy.

The bank's current status is similar to that of the overall economy - recent history has been great but tougher times lie ahead.

However, just like the Irish economy, the sustained advances over the good years have left the bank in a strong and robust position that should enable it to cope with the more adverse economic climate that seems to be in prospect.