Anglo-Irish Bank, the most exposed of the Republic’s banks to the country's tumbling property market, has scrapped its final dividend and taken a €500 million provision against future bad debts.

The lender, whose shares have fallen over 90 per cent on the year, unveiled the cancellation of its payout as it reported a 29 per cent rise in core pre-tax profits to €1.77 billion but a 34 per cent fall in earnings per share to 88.4 cents in the 12 months to September 30.

David Drumm, chief executive of Anglo-Irish Bank, said: “Strengthening our capital base is a key priority and, accordingly, the board does not propose a final dividend in the current year.”

Anglo-Irish Bankreported a Tier One capital ratio — a key measurement of a bank's financial strength — of 8.4 per cent but, with that figure forecast by analysts to fall closer to 6 per cent in the current financial year, the bank is expected to raise additional capital.

AIB and Bank of Ireland, its bigger rivals, have already secured €2 billion each under the Irish Government’s two-year guarantee scheme, and Anglo Irish is expected to take advantage of the same facility.

The bank’s €500 million provision represents a 16-fold increase increase over the previous year.

The bank said the charge “reflects an allowance for potential losses in the loan book where there is currently no specific evidence of impairment on individual loans”.

Almost all Anglo-Irish Bank's €73 billion loan book is secured on commercial property in Ireland and the UK, which has raised expectations that provisions will continue to increase steeply amid a deepening recession in both countries.

However, the bank contends that its business model, which is based on a greater level of loan guarantees and collateralisation than its peers, should protect it from the worst of the downturn.

“We are well positioned for the recessionary environment ahead”, said Mr Drumm. “We will continue to generate robust core profits annually over the next three years, which will provide the capacity to absorb anticipated increased lending impairments, whilst also improving capital ratios”.

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