IFSC-based Depfa Bank has posted a 13 per cent annual increase in net profits for the first quarter.

The increase to €134 million marked the bank's best quarterly result with the growth driven by business across all regions and products.

Analysts were not universally impressed, however, with some questioning the basis for the expansion.

"The bottom line result is strong but it was driven by trading and asset sales. It is questionable whether this is sustainable," said Sal Oppenheim analyst Carsten Werle.

The bank's trading result of €62 million for the quarter was up 38 per cent year on year, while it made a profit of €70 million from selling public bonds.

Gerhard Bruckermann, Depfa chairman and chief executive, pointed out that the bank's profit mix had "changed dramatically", moving away from trading and towards its three "customer-driven" segments.

These three sectors - budget finance, infrastructure finance and client product services - combined to deliver 79 per cent of total operating income over the quarter, up from 59 per cent in 2005.

Mr Bruckermann said the remaining trading division would always be volatile, while the customer-driven businesses would provide more reliable growth over the long term.

New business commitments over the quarter amounted to €13.2 billion. He acknowledged that this looked "small" compared to the bank's full-year guidance of €90 billion, but he said a quarter was "really too short a period to make conclusions".

Pretax profits amounted to €186 million over the first three months, marking an annual increase of 29 per cent.

The bank is targeting an after-tax return on equity growth of between 20 and 25 per cent for the year, and recorded almost 23 per cent growth in the first quarter. "We're nicely on the way," he said.

Return on equity measures how well the bank uses its reinvested earnings to produce new earnings.

Mr Bruckermann said North America was "doing very well" for the bank, producing the most substantial year-on-year regional growth.

Up to a quarter of Depfa's new business comes from the US and Canada.

The bank has an exposure to infrastructure projects in the Republic of roughly €60 million, but is keen to expand this.

In the near term, it would like to lend several hundred million euro to the consortium headed by Treasury Holdings and Irish Rail that is the preferred bidder to build the State's first national conference centre.

The bank is also supporting a bidder in the procurement process for the new €150 million Criminal Court complex in Dublin. - (Additional reporting, Reuters)