Dublin-based Depfa Bank, which finances public projects, yesterday reported a bumper performance in 2003 and forecast another strong year in 2004 on the back of expansion in the United States.

The bank, which is based in the International Financial Services Centre but listed on the Frankfurt Stock Exchange, saw profits jump 57 per cent in 2003 to €370 million as the cost of funding dropped. Earnings per share rose 59.6 per cent to 10.69 cents.

Depfa had twice raised its profit forecast during the year, most recently in November last when it projected net income of €350 million.

The German bank organises public-sector bonds, raises money for infrastructure projects in Europe, the US and Asia, and offers investment banking advice to public bodies.

It located in Dublin for tax reasons in 2002 after the Depfa Group split itself in two, with its property bank remaining in Germany. While Depfa only started conducting business in Ireland last year, it has technically become the largest bank in the State with assets under its control more than 60 per cent ahead of its closest domestic rivals, AIB and Bank of Ireland.

During 2003, Depfa concluded €100 million of business with local authorities in the Republic. These include Dublin City Council and Cork, Waterford and Mayo county councils. It has also expressed an interest in a public-private partnership deal with the Government to fund a metro for Dublin.

The company employs about 320 people, including 120 at the Dublin operation. All divisions contributed to the 2003 profit figure, with substantial increases in both net interest income and net commission income. The bank attributed its fall in funding costs in large part to the successful launch of Irish asset covered securities during the year.

While costs rose 18.6 per cent on the previous year to €115 million, the cost/income ratio fell to 18 per cent from 23.8 per cent in 2002 as a result of the strong profit growth.

Announcing the 2003 results, the bank set a profit target for 2004 of more than €400 million, with a return on equity of more than 20 per cent.

Analysts said the 2004 forecast looked cautious. "The forecast for this year seems very conservative," said Ms Barbara Pires of ABN Amro. "We are definitely expecting more than that."

HSBC analyst Mr Peter Barkow noted that Depfa's profit came out nearly 50 per cent higher than its first target of €250 million last year.