IPM Irish Life&P.Gp

RNS Number:8379J
Irish Life & Permanent PLC
13 December 2007


                             Irish Life & Permanent plc

                          Pre-close period Trading Statement


                                                           12.00pm Dec 13th 2007


Irish Life & Permanent plc issued the following trading statement ahead of its
closed period for the year to 31 December 2007.


Overview


2007 promises to be another record year for the group reflecting the strength of
our brands, franchises and distribution capability together with the low risk
nature of our businesses.


The group's life and investment business has once again enjoyed tremendous
growth in revenues - buoyed by strong demand for pensions in particular - and
operating profit growth is expected to be mid-twenties percent for the year.


Our banking business, notwithstanding the slowdown in the housing market and the
dislocation in global credit markets, will report strong double digit loan
growth and will deliver another year of good operating profit growth. In
addition the bank expects to attract record numbers of new current account
customers.


Reflecting this strong performance we expect the full year dividend to be in
line with market consensus.


As we look into 2008 the continued credit squeeze poses a challenge for all
banks but the funding mix of our banking operation and the high quality / low
risk nature of our lending assets leave us comfortable with the bank's funding
position for next year.



2007 Sales Expectations


Life Business

Life sales* in Ireland (excluding investment sales by ILIM) are expected to grow
by c.30% for the full year. The principal driver - apart from the first half
boost from maturing SSIAs - has been the strong growth in pension business,
particularly in Irish Life's retail division.


Our asset management business, ILIM, has enjoyed record inflows through the year
- up over 75% on 2006 and its funds under management are about 10% ahead so far
this year.



Banking Business

The group's banking business, permanent tsb, continued to expand and grow its
franchise in 2007. Loan book growth for the year is expected to exceed 15% on
foot of gross new lending of over Euro12 billion (2006: Euro12.9bn). While new lending
will be down on the record level in 2006 it should still be some 25% ahead of
the bank's 2005 new lending levels.


The slowing housing market in Ireland has seen new residential mortgage lending
contract by circa 20% for the year with second half new lending volumes very
much in line with the first half, as we had previously guided. The slower
performance in Irish residential mortgage lending has been partially offset by
strong loan growth in Capital Home Loans, the group's UK mortgage business,
which expects to see new lending grow by over 40%, albeit with the pace of
growth slowing in the second half.


The success of the bank in attracting new customers via its strong current
account offering continues apace and the bank would expect to sign up almost
70,000 new customers this year (2006: 68,000).



2007 Operating Profit Expectations


Life Business

Life new business earnings for 2007 are expected to show growth in the high
teens percent. This reflects the strong expected sales growth of c.30% for the
year offset by lower margins. The life new business margin (ex-ILIM) is expected
to be c.19% for the year which is slightly below the first half outcome as a
result of a change in both product and distribution channel mix. The second half
of 2007 has seen a lower proportion of protection and investment bond business
and a proportionately higher amount of sales through our broker and
institutional channels.


The existing book of in-force business is expected to deliver strong growth in
earnings for the year reflecting the growth in the book and positive experience
variances and assumption changes.


Overall life operating profit* is expected to grow c.25% for the year.


Banking Business

The strong growth in the bank loan book coupled with an expected full year net
interest margin of circa 115 bps (2006: 119 bps), as guided, will see mid-teens
percent growth in the bank's net interest income in 2007. This would represent
an excellent outcome given the difficult conditions in global credit markets in
the second half of the year.


Credit quality also remains excellent across all loan books as evidenced by the
continuing benign arrears experience. However in the last quarter, along with
many other Irish banks, permanent tsb was affected by the actions of a rogue
solicitor. A full provision of Euro11m is included in respect of the loans advanced
although we will be vigorously pursuing recovery in this case. Aside from this
exceptional provision the increase in the impairment charge for the year is
expected to be behind the growth in the loan book.


Bank operating profit growth, before the exceptional provision of Euro11m, is
expected to show mid-teens percent growth for the year.


Associated business

The group's share of earnings from its associate business, Allianz (Ireland) in
which it has a 30% interest, is expected to be in excess of Euro30m for the year.



Asset Portfolios


Movements in asset values, currencies and interest rates impact the embedded
value of the group's life business and the mark to market valuation of the
bank's liquidity / investment portfolio.


The second half upheaval in equity and debt markets plus the relative
strengthening of the euro has been the principal contributor to the investment
variance ("short term investment fluctuations") on the life embedded value
which, as of the end of last week was estimated at circa Euro60m negative versus
Euro21m positive at the half year.


The vast bulk of the variance represents the present value of the reduction of
future fee income from unit-linked funds arising from the falls in unit values.
Within the non-linked portfolio, out of debt securities of Euro1.5bn, only one
asset of Euro38m is subject to a mark to market write-down which is not expected to
be material.

The banks liquidity portfolio of Euro4.2bn is invested predominantly in sovereign
bonds (60%), high grade financial FRNs (30%) and prime (non-US) RMBS (10%). The
portfolio is rated 73% AAA, 20% AA and 7% A (FRNs) and has no sub-prime
exposure. The mark-to-market adjustments on this portfolio are expected to be de
minimis.



Funding


The diversification and duration profile of the group's funding sources place it
in a strong position in the present credit environment. Currently some 68% of
the bank's funding base is sourced from customer accounts and term debt.


The high quality and low risk nature of the group's lending activities -
overwhelmingly prime residential mortgages - provides a pool of assets against
which funding can be drawn through the ECB Repo facility. At the year end we
expect to have available facilities from the ECB totalling Euro20bn of which Euro4bn
will have been drawn. The balance of Euro16bn together with other assets, which
have yet to be collateralised, will provide a secure underpinning of the group's
funding options and requirements through 2008.



2008 Outlook


The prospects for the group's life business, which accounts for approximately
60% of the group's earnings, continue to be favourable given the wealth
accumulation and positive demographics in the Irish economy and public policy
support for wider pension coverage. With the increased distribution capability
of our life business and the strength of our investment management franchise we
are targeting double digit growth in life sales in 2008.


The slowdown in Irish residential mortgage lending in 2007 is expected to
carryover into 2008. However the underlying fundamentals of the market remain
robust and are strongly supported by government policy. Taken together with
tighter credit conditions the pace of loan growth in the bank is therefore
expected to moderate in 2008 and higher funding costs arising from the
continuing global credit crunch will impact bank earnings - the extent depending
on when, and at what level, credit spreads eventually normalize.


If funding spreads continue at the present extraordinarily high levels (c.100
bps over official ECB rate) to the end Q1 2008, and then settle at 40 bps over
ECB, then group operating earnings for 2008 could be flat or slightly ahead of
the expected 2007 outcome. However were current elevated rates to prevail right
through the first half of 2008, and then rebase at 40 bps over ECB, the impact
on group earnings could be high single digit percent negative.


Conclusion


2007 is set to be another record year for the group with an exceptional
performance across both our life & pensions and banking businesses.


While the current environment is proving challenging for the banking sector
generally, the low risk nature of the group's activities, the strength and depth
of the franchises we have developed in our key businesses and the underlying
resilience of the Irish economy give us great confidence for the future.



* Life sales on an APE basis; life Operating Profit on an Embedded Value basis.



The 2007 preliminary results announcement will take place on Wednesday 27th
February 2008.



Analyst Conference Call

Denis Casey, Group Chief Executive and Peter Fitzpatrick, Group Finance Director
will host a conference call for analysts at 14.30 GMT on Thurs 13 Dec.


To join the conference call, please dial in to the relevant number below 5
minutes before and ask for the Irish Life & Permanent call

Irish participant number                     (01) 655 0186

UK participant number                        (0) 20 7138 0815

US participant number                        718 354 1359

Other participants                           +353 1 655 0186


The slide presentation accompanying the conference call will be available on our
group website 

www.irishlifepermanent.ie/ipm/ir/reportsandpresentations/results/from 14.00.


Replay Facility

A replay of the conference call will be available two hours after the call. This
service will be available until 21.00 on 21 Dec. The telephone numbers and
access code are:


Irish participant number                   (01) 659 8321

UK participant number                      (0) 20 7806 1970

US participant number                      718 354 1112

Other participants                         +353 1 659 8321

Pass code for the replay                   2512447#


Contact details

David McCarthy, Group Chief Financial Officer
Tel: +353 1 856 3050


Barry Walsh, Head of Investor Relations
Tel: +353 1 704 2678


Ray Gordon, MRPA KINMAN Consultants
Tel: +353 1 6788099



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