Bloomberg News

Irish Life & Permanent Cuts Profit Forecast on Freeze

May 01, 2008

Irish Life & Permanent Plc (IPM), Ireland's biggest mortgage lender, lowered its operating-profit forecast as the credit-market freeze pushed the cost of money higher.

Operating profit this year should meet analysts' estimates of 563 million euros ($880 million) in 2008, the Dublin-based company said today. Irish Life had said in February that profit may rise ``marginally'' from 590 million euros in 2007.

Irish banks are suffering from a slowdown in lending and a decline in house prices after the European Central Bank raised interest rates eight times since late 2005. Banks are also grappling with higher borrowing costs in money markets amid the fallout from the U.S. subprime mortgage crisis.

``We're hopeful of an easing in the third quarter,'' Chief Financial Officer David McCarthy said in an interview. ``Then again, we were hopeful about that back in February.''

Money-market rates have risen amid gridlock in interbank lending sparked by the subprime-mortgage crisis. The three-month euro interbank offered rate, or Euribor, has risen 48 basis points to 4.86 percent since the end of February.

New lending may fall as much as 20 percent this year, McCarthy said. Irish mortgage lending grew at the slowest annual pace in almost 16 years in March, the country's central bank said yesterday.

`Downside Risks'

The company, which is also Ireland's biggest life insurer, said rising pension sales partly offset a ``sharp decline'' in the sale of single premium investment bonds. Sales at its life and pension units fell 10 percent in the first quarter as the economy slowed. Sales for the full year may drop between 10 percent and 15 percent, McCarthy said.

``Overall, the updated outlook is ahead of our expectations, but, in our opinion, the risks remain to the downside,'' Sebastian Orsi, an analyst at Merrion Capital in Dublin, who has a `hold' rating on the stock, wrote in a note

Irish Life fell 57 cents, or 5.2 percent, yesterday to 10.29 euros in Dublin trading, giving the company a market value of 2.8 billion euros. The shares have dropped 31 percent over the past six months. The Dublin market is closed today.

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net.

To contact the editor responsible for this story: Riad Hamade at rhamade@bloomberg.net


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