Bank of Ireland chief executive Brian Goggin defended the status of Irish banks as the most profitable financial institutions in Europe, attributing their high earnings to the State's economic boom.

"If an economy like ours is booming for 12 years, then you would expect the majority of participants to prosper," Mr Goggin told reporters after an annual meeting with shareholders.

"We've made a significant contribution to economic growth and have also benefited from this growth." Ireland is now the second-wealthiest nation in the world with more than 30,000 millionaires living here, according to research published by Bank of Ireland Private Banking earlier this month.

A European Commission report has found that the Republic's banks keep more than half of their total retail income as profits. Irish consumer loans, for instance, cost an average of €668 in 2004, while the EU average stood at €367.

Bank of Ireland, the second-largest financial institution in the State, reported annual underlying pretax profits of €1.39 billion for the year through March.

Richard Burrows, the bank's governor, told shareholders trading performance was strong in the first quarter of the current financial year and reiterated that full-year growth in earnings per share would likely come in at a rate of "low to mid-teens."

However, Bank of Ireland Asset Management (BIAM), the institution's black spot, will not "recover overnight" from the 32 per cent slump in pretax profit posted by the business in the last financial year, Mr Burrows said.

BIAM, the biggest Irish fund manager, appointed Paul Boyne and two other managing directors in a shake-up of the department. The bank also acquired a 71.5 per cent stake in US hedge fund manager Guggenheim last January.

In the UK, meanwhile, Bank of Ireland will probably post "low-double-digit" growth and increase its share of the market there, Mr Goggin said after the shareholder meeting.

The bank said in May that its mortgage lending in the UK climbed 22 per cent and that volumes at its business banking unit rose 46 per cent. It also predicted that the bank's Post Office financial service joint venture would break even in the final quarter of this financial year.

The chief executive was also upbeat about banking customers weathering expected further interest rate increases this year, due to Bank of Ireland's rigorous stress testing of loan applicants and Ireland's "unusually high" savings rate of 13 per cent.

"It is not in our interest to see customers borrow at a level they can't afford," he said.

A further quarter per cent interest rate rise now looks almost inevitable when the European Central Bank holds its next meeting in two weeks, IIB Bank economist Austin Hughes said yesterday. He expects rates to rise twice further in 2006, most likely in October and December.

Mr Goggin and his colleagues, however, came under fire from shareholders about the changes the bank is making to its pension scheme, which will see new staff excluded from the existing plan.

Mr Burrows said Bank of Ireland had to close the current scheme to new employees because the bank has a pension liability of €800 and has an open liability.

Bank of Ireland, the governor said, was just one of a number of companies rethinking their retirement schemes amid a significant change in how companies account for money they owe to their pension funds.

The bank's staff rejected plans in June for the new hybrid pension scheme, which Bank of Ireland claims is a mixture of both a defined benefit and a defined contribution scheme. Shareholder Geraldine Langan, who worked with the bank for 39 years, told executives at the meeting the scheme discriminated against new staff because it will pay between one-quarter and half of their salaries on retirement, compared to the equivalent of two-thirds for the existing fund.

"Bottom line is the bank will save money by scrapping the current pension scheme, therefore meaning greater profits for institutional shareholders at the expense of young staff," the Irish Bank Officials Association said in a memo to employees this week.