Shares in Irish Life & Permanent (IL&P) fell 6.7 per cent after it announced that group operating profits may fall by a "high single-digit percentage" if the credit crunch continued through the first half of next year.

Unlike its rivals, which provided figures in recent weeks, IL&P decided to give an analysis in a pre-close trading statement of how profits would be affected if the credit crunch continued into 2008. The group said "the continued credit squeeze poses a challenge for all banks".

IL&P shares fell by 11.6 per cent to a low of €11.80 at one point in trading before closing down at €12.46, despite saying that 2007 would be another record year.

The group said the pace of loan growth - combined with tighter credit conditions - would "moderate" in 2008 and would affect its earnings. The extent of the drop in profits would depend on how quickly conditions in the credit markets returned to normal.

IL&P said 2008 operating earnings could be flat or slightly ahead of the expected 2007 outcome if the high interest rates in the money markets settled down after the first-quarter of next year.

Operating profits in the overall life business, which accounts for 60 per cent of the group's earnings, are forecast to grow by about 25 per cent for 2007, while life new business earnings are expected to show "high teens" growth due to lower margins.

Sales in the life business are expected to rise by around 30 per cent this year due to maturing SSIAs in the first half of the year and strong growth in pensions.