First Active has signalled a strong set of results for 2002 with the former building society suggesting that shareholders can expect a 20 per cent rise in operating profits, before tax.
Last year, First Active returned a 32 per cent rise in pre-tax profits to €54.4 million. Yesterday's report indicates a figure this year of around €63 million. Its performance has been boosted by the Government Special Savings Incentive Scheme (SSIS) and good growth in lending, according to a trading statement issued yesterday.
In the statement, First Active finance director Mr Michael Torpey said its growth reflected the continued strengthening and development of its core Irish business and demonstrated the value that had been created through its strategy to focus on the Irish mortgage and savings market. First Active sold its interest in Britannic Money in Britain in September for €108.7 million.
Over the next three years First Active's earnings will be reduced by up to 5 per cent following the imposition of a Government levy on Irish financial institutions, which was announced in the Budget. The impact on First Active is proportionately greater than for its rivals as it is solely reliant on the Irish market for its business.
First Active shares closed at €5.32 in Dublin yesterday following the statement.
Apart from the SSIS, the bank said sales of savings and investment products had been difficult, due to low interest rates and weak stock markets. Good demand for mortgages helped to underpin sustained growth in lending. Its lending activities were supported by its branch network with First Active forecasting that total new loans from this source would rise by 40 per cent.
Gross new advances through the broker channel improved in the second half of this year after a decline in the first six months. Overall it expects total new advances to show high single-digit percentage growth.
The bank said it would continue to be selective about lending on commercial property and that total new loans to this sector would be lower this year than in 2001, coming in at around 15 per cent.
Growth in its loan book is expected to be in the low double-digit percentages for the year, which First Active said was a "highly satisfactory outcome".
Despite the slowdown in the Irish economy, First Active has not reported any deterioration in the quality of its loan book. Its bad debt charge will be about 0.12 of a percentage point of average loans to customers. The bank said that asset quality had been maintained and it expected a continued decline in the ratio of non-performing loans this year compared with 2001.
Profit margins have been maintained at around 1.4 per cent, similar to the previous year. Income from its core lending and deposit activities is expected to grow by a high single-digit percentage this year. In terms of other income, the bank benefited in the first half of the year from the SSIS but said that further growth was achieved over the remainder of the year. First Active's full-year results will be issued on January 28th, 2003.
