Irish Life and Permanent has refocused its Isle of Man offshore banking operation in a bid to attract more customer deposits as capital strength continues to be a key concern in the financial sector.

Chief executive Denis Casey told analysts on a conference call after the group's pre-close trading statement last Thursday that the bank had expected to book an extra €1bn in deposits in the first half on the back of renewed activity at its Isle of Man subsidiary as well as a push to bring new customers in at branches in Ireland.

The new deposit influx represents a 10% rise on the same period last year, when deposit growth was effectively flat. Casey said he expects IL&P to have total customer deposits of €15bn by the end of the fiscal year.

The increase, which came as something of a surprise to analysts, is good news for the group's banking arm, Permanent TSB, which is the largest mortgage lender in Ireland with a 21% share of the residential lending market.

IL&P also has a significant €8.4bn UK mortgage book packed with somewhat riskier buy-to-let mortgages.

The bank built up much of this portfolio during the boom years but deposit-taking failed to keep pace, leaving the business with a very high loan-to-deposit ratio of 288% as against an Irish peer average of 157%. This has put the capital base under some strain at a time when new money has not been easy to come by.

There had been considerable market anxiety about IL&P's need to refinance €3bn of its funding in the third quarter, which led to a sharp sell-off in the group's shares ahead of Thursday's announcement. But Casey assured analysts that €2bn of the funding was spoken for and in transit, with the rest to come in July.

The price was relatively expensive at 100-110bps above the three-month Euribor rate, which is already at historic highs, but in line with a Bank of Ireland debt issue earlier in the week – suggesting Irish financial institutions are paying a premium to some of their European peers, such as Italy's Unicredit, which got more favourable terms as recently as May.