Ulster Bank has reported profits of €775 million for 2005, an increase of 15 per cent on the previous year.

The performance came as income increased from €858 million to €1.25 billion and customer numbers climbed by 68,000 to 1.6 million.

Cormac McCarthy, group chief executive of Ulster Bank, said the "impressive" growth had come from all aspects of the business, with mortgages a particular highlight.

Ulster Bank advanced €19.2 billion to mortgage customers last year, thus beating the market with a 31 per cent increase on 2004. Average customer deposits also posted good growth, rising by 21 per cent to €21 billion.

Mr McCarthy estimated that Ulster was now either the leader or second player in new mortgage business, while holding third or fourth position in the overall market.

The bank was the first last year to offer 100 per cent mortgages to first-time buyers under its First Active brand in the Republic and through Ulster in the North.

Ulster Bank's total lending last year amounted to €41.1 billion, a jump of 23 per cent on 2004. Within this overall figure, business loans were a key driver with Ulster Bank operating "business centres" across its 304 branches.

Mr McCarthy said Ulster was not "picking and choosing" its business banking clients, but was offering services to a wide range of customers.

He pointed out, however, that the bank had backed "a number of high-profile property transactions last year, including Seán Dunne's purchase of the Jurys Ballsbridge and Berkeley Court sites in Dublin for a total of €379 million.

Ulster is in the process of upgrading its branch network, having spent €75 million on this "branch and brand improvement programme" last year. Overall expenses grew by 11 per cent to almost €400 million. This branch effort will continue in 2006, with 57 branches to be revamped by the end of the year.

Mr McCarthy declined to comment directly on Ulster's margins, but he acknowledged that they had been falling and would erode further in the future. He said he "would not disagree" with comments made by AIB chief executive Eugene Sheehy last week about banks needing to operate on even tighter profit margins over coming years.

Referring to the increased competition in the banking market, Mr McCarthy said that while Ulster has "great respect" for its competitors, the bank is "a very, very powerful business".

"Good economic stories with good growth behind them will attract new entrants," he said, adding that Ulster has "no concerns about increasing competition."

Mr McCarthy was also coy on any pay increases the bank might offer to its staff under current wage negotiations. Ulster's staff are balloting on a recommendation that Ulster should pay a 4 per cent increase. The bank had previously offered 2.75 per cent.

Mr McCarthy said the bank had "a very good relationship" with its 6,000 employees.