Shares in Anglo Irish Bank surged by 5 per cent yesterday after the bank posted a 28 per cent jump in like-for-like pre-tax profits and flagged a healthy pipeline of new business.
Growth in the year to September 30th was largely fuelled by continued solid growth in lending, which provides 80 per cent of Anglo's profits.
Loan growth of 35 per cent brought lending to €24.4 billion and helped to lift pre-tax profits above the half-billion mark for the first time.
Customer deposits were also up strongly, climbing by about €5 billion to almost €20 billion. About €1.4 billion of the increase came from retail, rather than business, deposits.
Mr Seán FitzPatrick, who was making his last results presentation before departing the chief executive position, said the performance was "clearly sparkling".
His successor, Mr David Drumm, said there would be "more of the same" in the future.
Mr Drumm, who takes over when Mr FitzPatrick becomes chairman on January 28th, confidently predicted that Anglo's profits will double within the next five years.
Pre-tax profits for the year to the end of September came in at €504.1 million, up 45 per cent from €346.5 million a year earlier. When the absence of general provisions for bad debts was stripped out of the 2003 base, like-for-like growth amounted to 28 per cent.
Anglo ceased making general provisions last year, and now only makes specific provisions.
The results came in well ahead of analysts' expectations and sparked a round of upgrades.
Merrion analyst Mr Séamus Murphy raised his end-2005 price target on the stock from €17.30 to €18.50 on the back of the numbers. He said Anglo remains his "top pick" of the Irish banks, citing confidence in management's ability to deliver "superior earnings growth" against a positive backdrop for interest rates.
Unlike Irish retail banks, Anglo has not suffered from any significant margin attrition as interest rates have fallen over the past few years. The bank is awarding a final dividend of 15.04 cents. This brings the total dividend for the year to 22.566 cents, up 20 per cent on 2003.
Mr FitzPatrick acknowledged that the bank's dividend cover, at five times, is relatively high, but he said Anglo is still in a "maturing" phase and thus needs to retain capital. He indicated that the bank's institutional shareholders are supportive of this.
Shares in the bank closed at €16.42 last night, up 74 cents. They touched a high of €16.50.
The market drew particular comfort from Anglo's pipeline of "work-in-progress" loans, which stood at €4.1 billion at year end.
This figure, which covers loans that have been agreed but not yet drawn down, compares to €3.4 billion at the end of the first half. Analysts said this leaves the bank on a firm footing for further strong loan growth in 2005.
Non-performing loans amounted to €148.3 million at the end of September, but Mr FitzPatrick said this was not of great concern since the security backing these loans would probably amount to €120 million.Anglo drew 55 per cent of its profits from the Republic in 2004, 35 per cent from the UK and 10 per cent from mainland Europe and the US. Mr Drumm said he expected this profit split to remain in place.
