First Active has reported a strong performance in the first half of 2002 and is confident about its prospects in the coming months based on further growth in the mortgage and savings market.

The former building society, which has undergone substantial restructuring in the past three years, recorded a 29 per cent rise in pre-tax profits to €30.4 million in the six months to the end of June.

Chief executive Mr Cormac McCarthy said it would continue to focus on the mortgage and savings market and to generate revenues from a lower cost base.

"Our branches are working more efficiently, there are very strong demographics to continue to support the mortgage and savings markets. It may sound boring but we will be doing more of the same in the second half."

After tax, the group's profits rose by 34 per cent to €25.9 million. Shareholders will be paid an interim dividend of 5.25 cent per share, a 17 per cent rise on the previous year. Earnings per share rose by 32 per cent to 18 cent.

During the six months, its cost/income ratio fell to 56.8 per cent from 61.4 per cent in the previous year due to the restructuring of the business.

First Active has centralised its operations in Dublin at its new headquarters in Leopardstown. During the past three years, its total staff has fallen from 1,000 to 700, it has reduced the number of branches in the Republic from 75 to 50 and has discontinued its arrangements with brokers. It got out of the credit card business and ceased operating current accounts for its customers in a bid to squeeze costs.

Mr McCarthy said the bank would continue its emphasis on cost-cutting although this was unlikely to include further job losses or branch closures.

"We are also continuously investing in the business and will always be looking at ways to contain costs," he said yesterday.

Total customer loans and advances rose by 5.5 per cent to €6.3 million in the six months.

Demand for mortgages was strong at the beginning of the year, much of which was due to some pent-up demand from 2001 when prospective homeowners delayed purchasing residential property amid uncertain economic conditions. Residential mortgages to First Active customers were up 6 per cent to €586 million. Lending through its branch network was ahead 50 per cent and currently represents 70 per cent of all new lending.

Mr McCarthy acknowledged the re-emergence of investors to buy residential property following the changes in taxation introduced in the last Budget. He estimates that about 25 per cent of new mortgages advanced this year were to investors.

The bank has no concerns about the mortgage market, which is its core business. Mr McCarthy said there are no bubbles on the horizon and that average loan compared to the value of property mortgaged is around €119,000.

First Active has a relatively small share of the savings market, about 2 per cent, which received a boost from the Government-backed Special Savings Incentive Scheme.