NATWEST GROUP PLC Ireland's largest bank by assets has recovered from the crisis more quickly than some of its rivals partly because its two main markets, Ireland and Britain, are among the fastest growing in Europe.
Stronger profit margins and fewer problematic legacy issues have also helped it lead a sector-wide revival after a property crash pushed some of Ireland' banks into state hands, closed others and eventually led the government to seek a bailout from the European Union and International Monetary Fund.
The bank, 14 percent state-owned, reported an underlying pretax profit of 921 million euros (650 million pounds) in 2014 after a restated loss of 564 million euros a year earlier.
Its shares surged 8 percent and were the second biggest gainers on the Stoxx 600 index <.STOXX>.
"We're in two growing economies in Ireland and the UK," Chief Executive Richie Boucher told Reuters. "We have started the current year very strongly. Based on the first two months of the year, loan growth should exceed last year."
Bank of Ireland said the improved economic backdrop allowed it to claw back 280 million euros of money put aside for bad home loans. This helped it to cut provisions to 542 million euros from 1.6 billion a year earlier and beat profit forecasts.
Analysts surveyed by Reuters had forecast an underlying pretax profit for 2014 of 745 million euros.
Bank of Ireland's strong performance follows a return to annual profits this week at Royal Bank of Scotland's (>> Royal Bank of Scotland Group plc) Ulster Bank unit. Allied Irish Banks, which reports next week, turned a profit in the first six months of 2014.
LOAN GROWTH
New lending rose to 10 billion euros from 6.6 billion in 2013, but the bank's loan book shrank to 82 billion euros from 85 billion at the end of June and 93 billion as recently as 2012 as repayments and redemptions continued to exceed new lending.
Although Ireland's economy is the fastest growing in Europe, many people are still grappling with big debts, meaning the stock of outstanding credit across the banking sector has shrunk for more than five years. But Boucher said the gap was closing.
Boucher said the strong momentum in new lending was evident across all divisions and could be complimented with a couple more loan book purchases.
Davy Stockbrokers' Stephen Lyons said this improved the prospect of net loan book stabilisation this year. Davy has an "outperform" rating on Bank of Ireland stock.
Bank of Ireland said its net interest margin, a measure that shows how profitable lending is, rose to 2.11 percent at the end of 2014 and was set to grow again this year, albeit at a more moderate pace.
The bank said its Core Tier 1 capital ratio, a measure of financial strength, rose to 14.8 percent or 9.3 percent under the so-called "fully loaded" ratios in new capital rules known as Basel III. This put the bank in a strong position to deal with the emerging regulatory requirements, chief financial officer Andrew Keating said.
From next year, the bank plans to stop counting 1.3 billion euros of preference shares that the state previously held towards its capital, a move that clears the way to a reinstatement of dividend payments.
Bank of Ireland's shares were 8.2 percent higher 0.34 euros by 0940 GMT, rising above the 0.33 euros per share former investor, U.S. billionaire Wilbur Ross, first cashed out at a year ago.
(Additional reporting by Alasdair Pal; Editing by David Clarke and Jane Merriman)
By Padraic Halpin
