The cost of investigations, a DIRT settlement with the Revenue Commissioners and rationalisation have hit profits at National Irish Bank (NIB).
The bank did, however, show some recovery in its underlying business.
In the 12 months to the end of September, NIB reported a 47 per cent drop in pre-tax profits to £9.9 million (€12.57 million) from £18.7 million. This was in line with expectations and reflected exceptional costs of a little more than £10 million. Exceptionals included the £3.4 million incurred last year by the bank as a result of the investigation into the marketing of unauthorised offshore insurance products. It also included interest loading on customer accounts at certain branches.
The bank made a settlement of £6.9 million with the Revenue Commissioners in relation to unpaid DIRT, interest and penalties. It had already paid £1.75 million to the Revenue ahead of the settlement, with the balance coming out of the full-year results.
A further £3.3 million was incurred as a result of costs associated with a restructuring programme implemented across the National Australia Bank Group. NIB chief executive Mr Don Price said the investigation was moving towards its final phase and he was hopeful the issue would be brought to a conclusion within the next six months. The bank has not made any provisions for the outcome of those investigations. Mr Price said this would be impossible. The bank stressed that underlying growth in the business had improved and it was focused on the greater integration of National Irish Bank with its sister, Northern Bank, to achieve the scale required to drive growth in Ireland.
Mr Price said the bank would be seeking to leverage its business much more from Northern Bank and to bring its cost base down.
"We will retain both brands, with back-office functions moving to Northern Ireland. We will keep two head offices and, together, the two banks will represent a relatively good-sized operation".
Mr Price added that the underlying growth in NIB's business was encouraging, with business lending up by 20 per cent, personal lending ahead by 12 per cent and mortgages up by 14 per cent over the 12-months. Loans and advances to customers increased to £1.5 million from £1.3 million. The bank's total assets increased to £2.3 million from £1.9 million.
NIB's chief operations officer, Mr Owen Vanzuyden, said, despite the bank's recent difficulties, customer loyalty had remained strong. "Any lack of progress is because we have been distracted by the ongoing investigations and not concentrating on growing the business."
Bad debt provisions have risen to £4.3 million, an increase of £800,000 on 1999, but the bank said it was not concerned about credit quality. NIB employs 820 people in the Republic and has already begun to move its back-office functions to Belfast. Mr Price refused to comment on whether it was considering any acquisitions in the Irish market but stressed that NIB was committed to remaining a player in Ireland. "We are definitely here to stay. There are other ways of growing our market share than through acquisitions, such as telephone banking," he said.
Northern Bank has also reported weaker results, with pre-tax profits down 8 per cent to £92 million sterling (£123 million) from £100 million sterling.
