Anglo Irish Bank has announced pre-tax profits of €784m for the twelve months until the end of September, down 37% on the profit figure for 2007.

Anglo Irish Bank says it is putting aside €0.5 billion in anticipation of losses on loans. This represents 0.71% of average loan balances and compares to a figure of €31m the same time last year. It says that impaired loans represent 1.3% of closing loan balances.

The lender is making impairment provisions ranging from 0.8% to 1.2% of the bank's lending book over the next three years and said it believes that most of these losses will arise in its development loan book.

Earnings per share fell by 34% to 88.4 cent. The bank's board says it is not paying a final dividend for the current year in an effort to further strengthen its capital ratios.

The bank says that lending increased by €9.3 billion on a constant currency basis to €73.2 billion with growth moderating to 5% in the second half of the year.

Lending by its Irish division came to €42.8 billion, up from €37 billion in 2007. This comprises investment and business banking of €31.6 billion, residential development of €5.9 billion and commercial development of €5.3 billion.

The US and US business accounted for €21.1 billion and €9.3 billion compared to €19.4 billion and €7.5 billion respectively.

Anglo Irish Bank says that it charged €27m for the year to September 2008 in relation to exposure to Icelandic banks. The bank also incurred losses of €4m arising from the collapse of Lehman Brothers and Washington Mutual in the US.

Anglo Irish Bank says it is well positioned for the recessionary economic environment ahead, despite the bank seeing the 'most extraordinary financial upheaval' in its lifetime, resulting in the failure of numerous financial institutions, both large and small, throughout the world.

The bank says that it is not anticipating any significant improvements in the economic environment before 2011.

'We expect that the ongoing actions being taken by worldwide monetary authorities and governments will result in gradual improvement in capital market conditions,' commented Group CEO David Drumm.

'However, the global economies are only now experiencing the early stages of recession with conditions likely to worsen and last for two to three years,' he warned.

Speaking on RTE radio this morning, Mr Drumm said that merging with another bank has not been on the bank's agenda.

He also said that the bank's executives will see a pay cut next year. He said that no bonuses will be paid, while salaries will be frozen. He said this would result in a 50 to 60% cut in annual remuneration for the bank's top management.

€500m fund for small businesses

Separately, Anglo Irish Bank announced today that it is setting up a fund worth €500m to provide short to medium term funding for small businesses. The launch of the fund follows similar announcements from other banks, and is billed as a step to stimulate the economy and assist the business sector.

The bank says it would like to increase the scale of the fund subject to demand.

The fund will be open 'to any established and well managed trading business which can demonstrate that it has the ability to trade through the current climate, with the right support'.

Shares in Anglo Irish Bank closed down 17.5% at 77.5 cent in Dublin late this afternoon, down 16.5 cent.