Life assurance and banking group Irish Life & Permanent has reported good progress in the first six months of 2000, and is hopeful it will shortly be able to add TSB Bank to its operations.
The company has announced an 8.5 per cent rise in pre-tax profits to €180.8 million (£143.4 million) in the six months to the end of June compared with €166.4 million (£131.9 million) in the same period last year. Chief executive Mr David Went said the results were very satisfactory and Irish Life & Permanent is confident of a positive outcome for the full financial year. "The benefits of the merger are flowing through and we are well positioned to benefit from the strong demand for our products," he said.
The bank has confirmed it has submitted an offer to buy TSB Bank. Bids from Irish Life & Permanent and AIB are being considered by the bank's trustees with a decision expected in the next couple of months. Mr Went said TSB would complement the strengths of the Irish Life & Permanent group and provide a real alternative for personal customers. Profit growth was driven by a good performance from its life assurance arm, while lower interest rates and increased competition depressed profits on its Irish Permanent banking activities. Mr Went said a restructuring plan is being implemented at Irish Permanent in an effort to reduce costs and help the company to become more profitable in the future.
Exceptional costs of €13.5 million impacted on its bottom-line performance. These include restructuring costs and a £7.5 million payment to the Revenue Commissioners in settlement of its DIRT liabilities on bogus non-resident accounts. After tax profits rose by 22 per cent from €108.7 million to €132.1 million with 75 per cent earned from life assurance and 25 per cent from banking. Life assurance sales from the group's businesses in the Republic, the UK and the US, increased by 23 per cent to €184 million. The Irish operations made most progress, accounting for €140 million of those sales, up 22 per cent on last year. Sales at its US business were also stronger at $39.8 million but progress continues to be sluggish. Sales at the UK arm were stagnant at £1.1 million sterling.
Costs across the life assurance division were substantially higher during the six months, up 27 per cent to €190.0 million. The bulk of this increase is due to the expansion of its workforce and payroll inflation, according to Mr Went.
By comparison, profits from banking were slightly ahead of last year, at €38.1 million up 7 per cent. The biggest factor restraining growth was the reduction in the profit margins earned by Irish Permanent on its core lending and savings activities due to low interest rates and intense competition. Net interest income was down 9 per cent at €84.6 million.
