Profits at National Irish Bank (NIB) rose 21 per cent to £8.9 million (#11.3 million) before tax in the six months to the end of March, with further growth predicted during the year, the bank has announced.

Its sister operation, Northern Bank, reported a modest 5 per cent increase in pre-tax profit to £48.4 million sterling (#77.8 million). Both organisations are owned by National Australia Bank.

It is the first time in recent years that NIB has reported growth in profits. Chief executive Mr Don Price said that while the business had begun to turn around in the middle of last year, the cost of its DIRT settlement and the ongoing High Court inspector's investigation into the selling of unauthorised offshore investment products to customers, had depressed profits.

All areas of business grew. Total advances to customers rose by 16.1 per cent to £1.63 billion including mortgage, personal and business lending. Customer deposits hit £1.36 billion, up 8.3 per cent, while demand for the bank's guaranteed equity bonds helped boost net interest income by £3.6 million or 12.6 per cent.

Mr Price said the bank had not seen any real signs of an economic slowdown in the economy and was confident it was well-positioned to achieve another strong performance in the next six months. Foot-and-mouth disease and its containment measures have not had any noticeable impact on customers, the bank said. It does not have a large exposure to agriculture in the Republic compared with Northern Bank, where 8 per cent of its loanbook is serviced towards that sector of the economy.

Northern's figures show lending growth of 6.1 per cent compared to the corresponding period in 2000, while retail deposits grew by 8 per cent.

NIB is preparing to introduce new mortgage products, which will offer home-owners greater flexibility, as well as equity release-type arrangements similar to those provided throughout the group.

Northern, which is one of only a handful of UK financial institutions not providing Internet-banking, has set this as one of its priorities, according to Mr Jo Anderson, head of finance at Northern Bank.