First-half profits down 88 percent at IL&P
Irish Life & Permanent Plc, Ireland's largest mortgage lender, said first-half profit fell 88 percent, hurt by higher borrowing costs and the country's deteriorating housing market.
Net income in the six months ended June dropped to €35 million, or 12.7 cents a share, from 289 million euros, or 1.05 euros, a year earlier, Dublin-based Irish Life said today in a statement. That missed the €63 million median estimate of three analysts surveyed by Bloomberg News.
Irish Life, which gets about two-thirds of its money for lending from capital markets, said its funding costs increased due to the freeze in credit markets. The company lowered its outlook for the full year after new mortgage lending in the first half fell 23 percent from a year ago as falling house prices and rising interest rates reduced loan demand.
''It's a challenging market but we're performing strongly,'' Chief Executive Officer Denis Casey said in the statement. ''Lending is down as expected given that the cost of borrowing has increased.''
Falling investment returns due to weak financial markets cut €230 million from profit. Excluding those losses, operating profit fell 7 percent to 300 million euros, the company said.
Full-year operating profit may fall as much as 10 percent from the €569 million it made it in 2007, the company also said. Irish Life had previously forecast operating profit would decline by a ''mid- to high single digit.''
Chief Financial Officer Peter Fitzpatrick ruled out tapping shareholders for funds, saying the lender has a ''very strong capital cushion.'' Irish Life will bolster its funding through a securitization of new pension sales, he said in an interview.
Dividend Unchanged
The first-half dividend was unchanged at 22.5 cents and the company it may not increase the full-year payout, Fitzpatrick said. The company's shares have fallen 54 percent this year.
Profit at Irish Life's banking unit rose 12 percent to €124 million, buoyed by a €29 million gain from the sale of a bond portfolio.
The net interest margin fell to 1.08 percent from 1.17 percent as result of higher funding costs and may drop to as low as 0.98 percent for the full year, the company said.
Loans in arrears were 0.12 percent of total loans at the half year, up from 0.11 percent in December. At the bank's U.K. mortgage business, arrears rose to 0.77 percent of loans from 0.4 percent in December. (Bloomberg)
- Ian Guider
