Irish Life & Permanent (IL&P) raised its forecast for full-year operating profit yesterday, citing strong growth in mortgage lending and an influx of new customers to the bank. The shares rose by 6 per cent.
In a trading update, the company said growth in pretax operating profit is expected to exceed 20 per cent in 2006, surpassing analysts' forecasts of growth of about 17 or 18 per cent.
"Our banking business is enjoying record volume growth in a buoyant market where it is winning customers and market share," IL&P said in the statement. "Operating profit for the year is expected comfortably to exceed previous guidance."
Yesterday's announcement follows similar upgrades from rivals Bank of Ireland and Anglo Irish Bank, though AIB disappointed the market last week when its trading update failed to contain an upgrade.
Analysts welcomed IL&P's comments, saying the forecasts were "well ahead" of expectations. Upgrades of about 5 per cent are now expected from the main brokerages.
IL&P said it was benefiting from a very supportive economic environment, which had encouraged strong performances at its banking, treasury and life and pensions' operations.
Gross new lending for 2006 is expected to grow by 30 per cent, generating growth in the overall loan book in the high 20s. The main driver, according to the bank, has been new residential mortgage lending in the Republic, which is expected to surpass the record €6.3 billion recorded last year by as much as 40 per cent.
The bank said it had been very successful in attracting new customers and predicted that, by the end of the year, it will have opened more than 80,000 of its new current accounts, an in- crease of 19 per cent year-on-year. About 80 per cent of these are new customers and 20 per cent are upgrades from existing accounts.
The bank last year became the first to introduce a completely free current account, which did not charge customers to set up direct debits or to cash cheques. Since then it has benefited as customers from other institutions that were not so quick to offer free banking, including rivals Bank of Ireland and AIB, have switched their accounts to IL&P.
The bank is forecasting current account balances will grow in the high teens this year, a factor that is benefiting the group's margins. While the net interest margin is still declining, the rate of decline is starting to ease. IL&P said it expected its UK mortgage company, Capital Home Loans, to record a 20 per cent increase in its loan book after activity picked up in the second half following a slow start to the year.
Elsewhere, the life business also performed well, with life sales in Ireland expected to grow by almost 30 per cent in the full year. Institutional contributions to ILIM, the group's fund management business, are expected to be about €1.9 billion, up from €1.3 billion a year earlier.
Emphasising the strong performance seen in 2006, Irish Life said it had "great confidence" for the coming year. The shares added €1.20, to end the day at €21.
