First Active has put in a solid half-year performance, generating strong growth in new business in the first six months of 1999.
Pre-tax profits at the newly converted bank rose by just 5 per cent to €26.2 million (£20.6 million) in the six months to the end of June, compared with €24.9 million (£19.6 million) in the same period last year. Last year's figures were enhanced by a one-off £4.6 million investment gain. Taking this into account First Active's underlying pre-tax profits increased by 37 per cent.
The results failed to support First Active's share price yesterday. Its shares slipped further in value in Dublin to close at €3.15, down 10 cents on the day. Investors will be now hoping for a strong performance in the second half of the year to improve the value of their shares. First Active group chief executive, Mr John Smyth, said yesterday the value of First Active's shares was determined by a number of factors. A strong performance over the next six months and the years ahead will be fully reflected in the share price, he said. First Active shareholders will receive their first interim dividend of 3.8 cents (3p) per share. The interim dividend will be paid on October 29th to shareholders on the register at the close of business on September 10th.
Members of the former building society who still hold free shares issued at the time of flotation will also be entitled to receive loyalty shares at the same time as the dividend payment is made. These investors are entitled to 23 free shares for every block of 450 free shares claimed by September 29th 1998 and held continuously until October 6th next. A second and final tranche of loyalty shares will be issued in the second half of 2000.
Meanwhile some 10 million shares are still unclaimed. Members who are entitled to take up the shares have until October 6th 2001 to do so. First Active said each of its operations in the Republic and UK have performed strongly this year.
After tax, First Active showed a 12 per cent rise in profits to €20.9 million up from €18.7 million in the same period last year. The 1998 figure was boosted by one-off investment gains from the sale of shares held in a number of UK financial institutions
Loans advanced during the six months more than doubled from €411 million to €874 million, the bulk of which were new mortgages. Mr Smyth estimated that First Active accounts for 15 per cent of the total new mortgage market this year. The group's net interest margin - the difference between the cost of funds to First Active and the price it charges to customers taking out loans - increased during that period from 2.02 per cent to 2.09 per cent. Much of this improvement is due to its earnings from the funds its raised through its flotation last October.
First Active's costs were also higher, with operating expenses up 6.3 per cent to €46.9 per cent. The cost to income ratio was also up from 61.3 per cent to 62.2 per cent. Mr Smyth attributed this increase to additional payroll costs stating this ratio would begin to fall in the years ahead. Its charge for bad and doubtful debts was lower at €2.3 million compared with €2.9 million in 1998.
In the UK First Active, which is a specialised mortgage provider, advanced €308 million in new loans to customers up from €136 million in 1996. Its total advances to customers grew by €244 million to €2.3 billion.
In Guernsey, where First Active operates a deposit taking business, funds increased to €572 million. Mr Smyth said the outlook for all of First Active's business looks good for the remainder of the year.
