Earnings fears see IL&P shares fall

INVESTMENT: Irish Life & Permanent issued an upbeat trading statement yesterday but saw the markets knock the share back over fears for earnings from its important investment business.

The company said volumes in both life and banking business had increased, strongly helped by the Government special savings incentive accounts (SSIA) scheme.

However, it warned that market conditions were hitting earnings on the investment side.

It said the level of new business generated within banking was particularly satisfactory given the disruption necessarily encountered in the branch network due to the integration programme with the former TSB and the launch of Permanent TSB.

Weak investment market conditions continue to prevail, according to the company, which says results for the half-year will reflect this.

The shares ended down 1.3 per cent at €15.24, having earlier fallen as low as €15.

There was a mixed reaction from analysts to the statement, though they remained upbeat about the company.

Mr David Odlum, an analyst with NCB Stockbrokers, said the statement was broadly in line with expectations.

"The firm has had a very solid underlying performance with the outlook for the full year remaining strong."

Mr Eamonn Hughes of ABN Amro said underlying volumes and margins were better than expected in both the life and banking businesses.

On the other hand, the unit-linked fee variance was "substantially negatively impacted" by the weak investment markets. He also said losses in the non-life associate (Allianz-Irish Life) were higher than expected.

He described the trading statement as "mixed".

The company said new business levels of life cover were expected to increase by approximately 35 per cent in the half-year to June 30th, when compared with the same period last year.

Sales were boosted by the SSIA scheme and by strong growth in the bancassurance channel, where sales grew by 100 per cent over the second half of 2001.

It is expected that life sales for the full year will be up by more than 20 per cent.

In banking, it said overall growth in the loan book was expected to be around 6 per cent compared to the December 31st, 2001 level and 12.5 per cent compared to the year-ago period.

With strong levels of approvals in the second quarter, the Irish residential mortgage business pipeline remained strong, the company said. Customer deposits are expected to increase by 10 per cent on the first half of last year.

It said the consolidation of the Permanent TSB merger would lead to a 40 per cent jump in earnings from banking over the six months to June 30th, 2001.