ACC Bank, the State-controlled financial institution, is looking for further strong growth in 1998 and 1999, following good results last year. These showed a 13.1 per cent rise in pre-tax profit to £15.68 million in 1997.

The chief executive, Mr John McCloskey, who was reappointed to the board yesterday (for a five year period), by the Minister for Finance, Mr McCreevy, has said the bank should enjoy substantial growth over the next two years. "We will see similar growth in 1998." The bank was "very happy" with the first three months of this year, which showed a 17 per cent growth in after-tax profits. The chairwoman, Ms Gary Joyce, said the quality rather than the size of the loan book will continue to be the overriding concern. "In particular, we will not finance home loans unless borrowers have the resources to meet repayments should interest rates rise to a long-term average of 10 per cent."

There are plenty of "big challenges" ahead, according to Mr McCloskey. These were singled out as the very high profit margins enjoyed by Irish banks, which are twice the EU level. That, he added, and economies of scale are some of the reasons "why we need a partner". The Minister for Finance is to benefit from the latest results with a rise in the dividend from £2.8 million to £3.64 million. That represents a 30 per cent increase, well ahead of the 1 per cent increase in earnings per share (eps) to 30.7p.

Interest rose to £108.2 million from £104.3 million. Net interest income grew from £43.9 million to £46.8 million.

The cost/income ratio, which measures the cost effectiveness of the bank, increased from 67.9 per cent to 68.6 per cent. This adverse movement, however, was due to exceptional rationalisation costs.

Mr McCloskey said the record profits were achieved through a 23 per cent increase in its loan book, a 30 per cent rise in non-interest income and a very successful performance by treasury. The growth, he added, was achieved in a very highly competitive market.

This competitiveness is reflected in the drop in the net interest margin from 3.13 per cent to 2.63 per cent. Other banks' net interest margins are also falling.

The results indicate that ACC has been expanding in non-traditional areas. Fees and commissions, for example, have risen from £4.25 million to £5 million. Dealing profit grew from £294,000 to £727,000. Other operating income jumped from £182,000 to £1.6 million, which represented a profit on the sale of an investment.

A breakdown reflects ACC's continued move into areas other than farming, which grew by only 3 per cent to £311 million. The business sector increased by 29 per cent to £705 million, while loans to the personal sector went up by 34 per cent to £383 million. The business sector is now the largest, accounting for 51 per cent of the loan book.