AIB reported a record 28 per cent surge in new lending in the Republic last year, with net new lending up by €6 billion.

The bank, which has aggressively chased new mortgage business, recorded a 34 per cent rise in these loans in 2003, well ahead of the 26 per cent increase in the market overall.

Mr Michael Buckley said this performance showed there was some "pretty clear water" between AIB and its competitors.

The bank which operates about 36 per cent of all current accounts in the Irish economy, has been winning mortgage business primarily from this customer base.

AIB claims that 32 per cent of new mortgages issues last year were to first time buyers, a further 29 per cent were advanced to investors, and about 20 per cent were taken up by customers buying second homes or topping up their mortgage.

At the same time he said the bank's loan-to-value ratio had risen marginally from about 68 per cent in 2002 to 71 per cent last year, raising little cause for concern.

"There is still 30 per cent equity on every mortgage we are writing. I would never say that the Central Bank was unnecessarily worried but none of the stress signs have shown up and we are quite happy," Mr Buckley said.

AIB expects that house inflation will continue to reduce and that this will lead to a significant decline within the next two to three years but the bank believes the rate of demand for mortgages will remain strong.

Just 3 per cent of the bank's loan book is made up of consumer loans and Mr Buckley signalled that this will be the next potential growth market for AIB.

If the scale of mortgage lending were to slow down, he said the bank would be able to scale up on consumer lending.