Bank of Ireland has increased its profit forecast for the current financial year after reporting a 16 per cent rise in annual underlying pretax profits to €1.39 billion.

The second-largest financial institution in the State is understood to be considering a sale-and-leaseback arrangement on a portfolio of properties in its branch network, but a final proposal is not likely to be finalised until later this year.

When once-off items were included in the figures for the year to the end of March - among them the profit on the sale of the Bristol & West branch network - pretax profit rose 31 per cent to €1.6 billion.

Bank of Ireland's profit growth was driven by a robust performance in its life business, wholesale banking, the Irish retail unit and by the expansion of its business banking and mortgage units in Britain. The bank added that its Post Office Financial Service joint venture in Britain would break even in the final quarter of the current financial year.

With the loss of mandates and falling profits at Bank of Ireland Asset Management (BIAM) a black spot, chief executive Brian Goggin said the unit would continue to lose business if it didn't turn around its investment performance.

While the bank said the unit represented only 1 per cent of group's profits, it warned that full impact on profits of the mandate losses had not yet been seen even after a 32 per cent drop to €85 million in pretax profits in a business division.

"I would hope that BIAM profitability would find its bottom in the year to March 2007," said chief financial officer John O'Donovan.

The bank predicted further profit growth thanks to the buoyancy in the Irish and British economies and the expected benefit from further internal restructuring. Cost savings were €5 million ahead of target at €35 million last year, while further savings of €75 million are projected in the current year.

The Irish Bank Officials Association said the results indicated there was no need for the bank's move last week to close its defined benefit pension scheme for new staff. Mr Goggin rejected that assertion, stating that criticism of the pension change was "ill-judged and somewhat disingenuous". The bank's proposal embraced "leading-edge innovative stuff", he said.

Mr Goggin said the bank would deliver "low to mid-teens earnings growth" in the year to March 2007. Such guidance implies earnings per share growth in excess of 14 per cent and the forecast was ahead of the bank's previous guidance of low double-digit growth, implying growth in the region of 12 per cent.

"I think that guidance is conservative," said NCB analyst John Cantwell, who said asset quality remained robust even though interest rates were rising.

Underlying earnings per share rose 16 per cent to 118.5 cent - in line with, or modestly ahead of, analysts' projections - and earnings per share including once-off non-core items rose 31 per cent to 136.4 cent. Non-core items helped bring total income 14 per cent higher to €3.68 billion while like-for-like income rose 8 per cent to €3.44 billion.

Pretax profits in Bank of Ireland Life rose 65 per cent to €134 million and rose 19 per cent to €386 million in the wholesale financial services unit. Profit before tax in the Republic of Ireland retail division rose 18 per cent to €550 million. Pretax profit in Britain rose 5 per cent to £238 million (€347 million).