Irish Life and Permanent has announced pre-tax profits of €460m for 2007, down from the €592m figure in 2006 as the bank said it witnessed very challenging times, especially in the second half of the year.
These figures are on an embedded value (EV) measure of profits, which is used by life insurance companies and which IL&P says is a more realistic measure of its performance.
However, IL&P reported a 12% increase in operating profits to €590m for 2007, up from €529m the previous year.
The bank's earnings per share rose by 9% from 178 cent to 195 cent, and it has declared a dividend of 75 cent for the year, up 10% on the 68 cent dividend for 2006.
IL&P's retail and corporate life sales rose by 32% to €634m, while its pension sales rose by 39% to €374m. The bank's loan book grew by 16% to €39 billion in the year. Its mortgage loan book in Ireland grew by 14% to €26.4 billion.
The bank said that the turbulence experienced in the global credit and equity markets sparked by the US sub-prime crisis and the impact which that had had on the world financial landscape is unparalleled in recent memory.
It added that it had taken a once-off charge of €11.7m for exposures created by 'the fraudulent activities of a rogue solicitor'.
Irish Life and Permanent's Group CEO Denis Casey said that while 2008 would be challenging, the company was guiding an improved outcome at this stage than they had previously indicated.
'In our pre-close period trading statement in December, we guided that the outcome for group earnings in 2008 could be in the range of flat or slightly ahead on the 2007 result to high single digit negative depending on which of the alternative credit market scenarios prevailed in 2008. Revisiting that guidance two
months on, we are now guiding an improved outcome with group operating profit for 2008 at the upper end of that range and ahead of 2007,' he said.
Irish Life and Permanent said that 2007 was an 'extremely buoyant' year for life and investment business in Ireland and all of its group divisions - retail, corporate and Irish Life Investment Managers - performed well.
In the retail life division, sales grew by 31% to €414m with all distribution and product lines performing well. In the corporate business division sales rose by 33% while ILIM had a record sales year with gross investment flows of €3.4 billion - up a hefty 79% on the funds inflow of €1.9 billion the previous year. This included €645m from the acquisition of the EBS Summit Funds.
Despite the slowdown in the Irish housing market last year and the impact of credit market turbulence the group said its banking business performed 'extremely well' with underlying profits up by 14%.
Due to the housing slowdown, new lending declined by 3% to €12.4 billion from the €12.9 billion in 2006, but total asset balances grew by 16% to €39.2 billion.
Gross new Irish mortgages issued by the group at €7 billion was a fall of 19% on the record levels of €8.7 billion issued in 2006 and reflected the softening of the Irish housing market, IL&P said.
Customer account balances at the end of December 2007 totalled €13.6 billion as 69,000 new accounts were opened by customers during the year.
The bank says that while the medium term outlook for its core banking and life businesses continues to be favourable, Irish Life and Permanent said that 2008 will present some 'significant challenges'.
It said that in the life business the downturn in markets experienced in the last quarter of 2007 has dampened investor appetite for equity and property based products.
'However, we expect a reduction in demand on this product line to be more than offset by growth in other product areas, particularly pensions, and overall our expectations are for mid single digit percent sales growth in the life company in 2008',' it said in its results statement.
The lender says that the slowdown in Irish residential mortgage lending is expected to carry over into 2008. However, it adds that it expects prices to stablise in the short term as supply contracts and demand improves in response to reduced prices.
'Taken together with tighter credit conditions, the pace of loan growth in the bank is expected to moderate to mid to high single digit percent in 2008,' it said.
Irish Life and Permanent shares closed down 34 cent at €10.91 in Dublin. The shares had jumped almost 9% yesterday.
