Irish Life & Permanent has issued a positive trading statement confirming strong growth in sales of pension, investment and protection policies, while lending has increased by more than 50 per cent.

The group, which had signalled a strong performance at its recent annual general meeting, said its banking business was enjoying particularly strong growth with new lending significantly ahead of last year's record levels as it continues to open more current accounts.

It said the environment in which the group is operating continues to be positive, with the Irish economy performing strongly, as employment growth and rising incomes underpin strong domestic demand.

The group said that there has been little direct impact from maturing SSIA policies and savings accounts as yet.

"We are optimistic for the outcome for the year as a whole, but would expect some slowdown in the rate of growth in the second half of the year given the exceptionally strong comparative performance in the second half of 2005," the statement noted.

"We are very satisfied with the progress made year to date and are on course to meet our full year targets."

Irish Life & Permanent shares closed down five cent at €18.20 in a weaker market.

At its banking operation, it said that new lending for the first six months of 2006 is expected to increase by almost 50 per cent with total loan book growth comfortably in excess of 25 per cent year on year.

The main driver of this growth is new residential mortgages in Ireland, where the group expects to record over €4 billion of new lending in the first six months, well ahead of market growth, it said.

Both consumer and commercial lending are also experiencing strong demand with combined new lending of over €1 billion, up more than 50 per cent. New lending at Capital Home Loans, the group's UK mortgage company, is also expected to be over €1 billion, just ahead of the first six months of 2005.

The bank has also been successful in winning new current accounts from other financial institutions, something which has been a main focus for the business this year.

It expects to have opened more than 30,000 new current accounts in the first six months, with current account balances expected to show growth in the high teens year on year.

The group's life business has seen a very strong first half trading, with investment bond, protection and pension sales significantly ahead of the prior year, according to the statement.

The volume growth improved life margins and reduced banking margins, it said, adding that it is on target to deliver strong operating earnings growth for the period.

Overall, life sales are expected to grow by around 30 per cent for the half year.

Sales at the retail life division are running strongly ahead, by more than 30 per cent, buoyed by sales of investment bonds, particularly property bonds and protection business related to mortgages.

The corporate life division is expected to deliver first half sales growth of over 25 per cent, reflecting strong growth in existing schemes from expanding employment and wage growth as well as new business gains.

Institutional inflows into Irish Life Investment Managers, the group's fund management business, are expected to exceed €1 billion for the first six months, up 40 per cent on the previous year.

In terms of earnings, it said that bank revenues are expected to show mid-teens growth in the first six months on the back of the growth in net interest income and an improved treasury result in comparison to the first half of 2005.

The net interest margin on lending will be affected by the fact that the group required higher levels of wholesale funding, which will will produce an expected full-year margin below its initial guidance of 1.17 per cent for 2006.

It said that despite this net interest, income growth for the full year is expected to be in double-digit percentage over 2005 levels.

Cost growth is running at around 6 per cent and the level of impairment provisions is expected to be broadly in line with the prior year as credit quality remains excellent, the statement said.

"These trends leave us on course for mid-twenties per cent growth in bank operating profit for the full year," it added.