"We're not going to go mad with the money, " ISTC director Frank Gaynor told the Sunday Tribune. "We don't see ourselves growing at the same pace [going into 2008]. Until the turmoil in the credit markets resolves, banks will be slow in issuing capital themselves and there will be less opportunity for us to lend to them. We have had little opportunity to lend since August and don't see it coming back in the morning."

The company announces its full-year results on 8 November and has predicted a 15m profit . . . nearly three times its haul for the same period last year . . . on the back of 3.1bn in total lending, up from 1.9bn in March.

But the biggest growth could be yet to come as institutions in its target market eat through their existing funding and seek secure sources of new capital later in the coming year.

"Normal activity will resume in Q3 and Q4, but this new funding is going to see us through for three or four years, " Gaynor said.

ISTC maintains a minimum capital ratio of 8%, just like a regulated bank, so it will be able to add 1.8bn more to its loan book on the back of the bond.

With so much uncertainty in the credit markets and other sources of funding . . . such as debt securitisation . . . effectively closed for the near term, a ready provider of capital like ISTC should thrive. That's what stockbrokers Goodbody (which runs a grey market in ISTC shares) argued in a note early last week.

Responding to a comment by Bradford & Bingley that the UK bank would seek private deals if it couldn't tap liquidity in the public markets, analyst Eamonn Hughes had the following to say: "ISTC jumps to mind as someone operating in this space from both sides of the balance sheet . . . firstly as someone positioned to look at lending to an institution like a B&B, and secondly, after media reports over the weekend that ISTC itself could see a large private investor (through his investment vehicle) provide debt funding (possibly preference shares) to ISTC to fund its growth."

Other market observers are not so sure about ISTC's prospects, however, given its own use of the capital markets to raise the money it lends. One analyst at a rival of Goodbody's expressed concern that expensive interbank lending could adversely affect ISTC's business model. A May report on ISTC by ratings agency DBRS made precisely this point, warning that ISTC's own funding was sensitive to a general widening of credit spreads, as well as a deterioration in the credit risk of other financial institutions.

That report came out months before interbank spreads stretched to 75 basis points in September, dramatically raising the price of short-term money and putting institutional borrowers under severe pressure.

Gaynor dismissed these concerns, however, pointing out that ISTC's total capital now stood at 600m . . . allowing it to lend up to 7.5bn. "We've been active in the last six months getting known among building societies in the UK and savings banks in Germany and Spain, " he said. "Dealing with us is better than going to JP Morgan or Merrill Lynch . . . someone who can offer certainty in this market is in a very strong position."