Irish Life & Permanent has revealed full-year profits slightly ahead of expectations, but warned that a slowdown in the mortgage market, particularly in the first half of this year, may weigh on future growth.

The bank yesterday said pre-tax operating profit increased 26 per cent last year, to €529 million, underpinned by strong growth in both its banking and life businesses. For 2007 it is forecasting growth in the low to mid teens.

Emer Lang, an analyst at Davy, said, given the "bumper" performance of 2006, a slowdown in profit growth this year was to be expected.

"They were quite cautious with their outlook on the mortgage market, but growth in the low teens is not a surprise by any means," she said, adding that the life business was in great shape.

Pretax profit for the whole group was 11 per cent ahead of the prior year at €592 million.

Operating profit in the banking business rose 36 per cent to €202 million, boosted by a very strong lending portfolio.

Like other lenders, Irish Life benefited from the particularly strong performance of the Irish housing market last year, increasing its share of the mortgage market from 19 to 22 per cent. Mortgage sales increased 27 per cent.

David Went, who yesterday gave his last results presentation as chief executive, said the performance of the mortgage lending business had been exceptional, though he expressed caution that this level of performance would continue.

He said he expected the market to be held back in the first half of this year as homebuyers awaited some sort of clarification on stamp duty following the election.

However, he said demand was definitely still there, and things should pick up in the second half of the year.

He said the bank was very happy with the quality of its loan book, and was seeing a continued reduction in the number of arrears on its Irish mortgage book.

The banking business also benefited from the increasing trend among Irish customers to switch banks. During 2006, Permanent TSB opened 84,500 new current accounts and is continuing to open them at a rate of 1,250 a week. Account balances were up 18 per cent and credit card sales doubled last year.

Elsewhere, the life business performed strongly, with operating profit up 23 per cent and sales 33 per cent ahead.

The contribution from Irish Life's stake in insurer Allianz came in ahead of expectations at €56 million, although the bank said this would be more like €40 million in 2007.

The shares slipped 18 cent, to close at €21.42 in what was a negative market yesterday. NCB said it would be upgrading its 2007 forecasts, while Davy left its target unchanged.