IL&P profit slips on weaker lending growth

Profits at Irish Life & Permanent slumped in the first half of 2008, with bank lending hit by weaker demand.

Net income fell 88 per cent to €35 million from €289 million a year earlier, missing the €63 million median estimate of analysts surveyed by Bloomberg. However, it said it has no plans to raise capital from investors.

The group's pre-tax operating profit for the first six months of the year fell 7 per cent to €300 million, compared to €321 million a year earlier.

A decline in equity and investment market values caused the group to write down its life embedded value figure, which reduced total pre-tax profits to €62 million, compared to €328 million in the same period of 2007.

The group said more targeted lending and weaker demand was to blame to for the slower growth in bank lending.

However, pension sales were up 3 per cent despite what the company described as a declining market.

Group Chief Executive, Denis Casey, said the market was challenging, but was pleased with IL&P's performance.

"Some parts of the Group are performing much more strongly than others in what is a relatively weak market overall," he said.

Sales in the retail division of the life sector fell as demand for investment products declined with the falling equity markets; however, the company said the corporate business rose 12 per cent in the same period.

"Lending is down as expected given that the cost of borrowing has increased and we're focusing on core markets such as owner occupiers, personal loans, car finance. But at the same time we've recruited over 31,000 new current account customers… and we're growing our deposit base," he said.

Additional reporting: Bloomberg