Analysts were upgrading forecasts for Anglo Irish Bank last night after the Republic's third-largest bank reported a better-than-expected increase in full-year profits and said the outlook for 2007 remained very strong. Claire Shoesmithreports.
Chief executive David Drumm said 2006 could be summarised "as a year of outstanding growth" as he revealed a 38 per cent jump in pretax profits to €850 million in the year to the end of September.
"Record performances were delivered across all divisions," he said, forecasting a doubling of group profit over the next four to five years.
Earnings per share (EPS) increased 32 per cent, to a record 93.7 cent, while the total dividend was up 20 per cent, at 16.24 cent.
Analysts welcomed the results, describing them as a superb set of numbers. House broker Davy raised its 2007 EPS forecast by almost 4 per cent, while NCB said it would probably raise its numbers by about 5 per cent. One commentator said he expected upgrades from some international houses of as much as 10 per cent.
The shares rose 3.4 per cent, or 49 cent, to close at €14.84 last night, with more than 8.8 million units changing hands.
Anglo Irish has in recent times expanded its business model, which focuses on providing secured loans to business customers and avoids the residential property market, into Britain and US.
Despite this, the group put in a very strong performance in Ireland, where Mr Drumm said it was benefiting from the healthy economic backdrop, good demographics and strong demand for commercial property.
Total lending across all three regions was up 45 per cent on the year before, at €50.2 billion. In Ireland, lending increased 46 per cent, or €9 billion, to €28.6 billion, while in Britain it was up 37 per cent, or €4.6 billion, to €17.2 billion. In the US, where the bank's business is starting from a much smaller base, lending increased 85 per cent, or €2 billion, to €4.4 billion. Almost 90 per cent of the bank's profits come from its lending business.
In addition, Mr Drumm said the bank had a further €8.7 billion worth of loans in the pipeline, giving it a good start to its 2007 financial year.
The lending margin held steady at 2 per cent, a factor welcomed by analysts, who said this was no easy task in the current competitive market. The cost/ income ratio was 26.5 per cent.
The proportion of bad loans as a proportion of the total loan book fell slightly to 0.52 per cent, or €263 million, less than the €270 million the bank had set aside for this purpose.
Mr Drumm said the bank had not seen an increase in bad loans as a result of the recent interest rate rises, and welcomed the increases, in particular in Ireland, where he expected the housing market to soften as a result.
Demand for commercial property, however, remained strong, he said.
Deposits were up 46 per cent, at €36.9 billion. Total funding increased 48 per cent, to €62.2 billion. Wealth management also put in a strong showing, contributing €53 million to total pretax profit, an increase of 39 per cent over the prior year.
Mr Drumm said the division had several significant deals in the pipeline. As a result, the immediate outlook for the business was highly positive.
During the year, Anglo Irish took on an additional 227 staff and expects to add about the same number next year. The company now employs 1,638 people.
