BANK OF IRELAND yesterday announced pre-tax profits of Ir pounds 280m ( pounds 274.5m), up 125 per cent, in the year to March 1994 - and was promptly attacked by the Irish Prime Minister for profiteering.
Albert Reynolds suggested that Irish banks' growing profits were being made at the expense of jobs.
He alleged that the commercial banks had widened the gap between rates charged to borrowers and those paid to savers. This was having a particularly serious impact on productive sectors, including small business and farming, he said.
He cited Irish central bank figures for December 1979 showing a 3.5 to 6 per cent gap between the rate of interest then paid to small depositors and that charged to AA- rated borrowers.
'We surely deserve an explanation as to why the gap between interest on larger demand deposits and interest paid on working capital loans to small firms has widened from a mere 2.75 per cent to 10.75 per cent,' he said.
Before the Prime Minister's attack Pat Molloy, Bank of Ireland's chief executive, defended the gap between saving and borrowing rates, saying it was 'not excessive' and had been narrowing.
Howard Kilroy, Bank of Ireland's governor, said the bank had enjoyed excellent performances by all of its main businesses, including a big turnround in the New Hampshire and British subsidiaries which had suffered losses in recent years.
The New Hampshire business contributed a total of Ir pounds 11.2m to profits compared with a loss of Ir pounds 45.4 in 1992.
With the British division, Ir pounds 78m of the improvement in the group's year-on-year result was due to recovery outside Ireland.
One reason for the booming performance of Irish banks is the recovery of the economy, forecast to grow by 4 per cent this year, which has driven down provisions against bad debts.
Bank of Ireland cut its provisions against loan losses from Ir pounds 150m last year to Ir pounds 69m this year. However, analysts doubt that provisions have much further to fall.
Earnings per share nearly tripled from 12.8p to 35.2p and the total dividend rose from 9.2p to 10.5p.
The key tier 1 capital ratio rose from 6.6 to 7.9 per cent, comparatively high in clearing bank terms, prompting analysts to speculate that the bank may want to expand its mortgage business by buying a building society or mortgage book.
Maurice Keane, deputy chief executive, said: 'We have no intention of buying a building society.' However, he did not rule out acquiring a mortgage book.
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