Bank of Ireland PLC had a 28 percent rise in first-half net profit.
For the April-September period, Ireland's second-largest retail bank and No. 1 mortgage provider said net profit rose to 919 million EUR(US$1.35 billion) from 720 million EUR in the first half of last year.
Bank of Ireland said it was not heavily exposed to volumes of bad loans - the problem most acutely threatening U.S. lenders that offer high-interest products to people with poor credit histories - but said the tightening of international lending markets since August was complicating its operations and driving up costs.
The bank lowered its profit growth forecast for the full year ending in March 2008 to "high single digits," compared to its previous guidance of growth in the "low double digits."
It blamed this weakening outlook on the global impact of the U.S. sub-prime crisis.
"Since August global financial markets have been experiencing one of the most significant dislocations in recent decades. Financial institutions are facing higher funding costs, more limited access to funding and concerns regarding exposures to U.S. sub-prime mortgages," the bank said.
"Funding costs, while improved somewhat from their extreme positions in early August, remain at significantly higher levels and will likely negatively impact our rate of profit growth in the second half of our financial year," it said.
Chief Executive Brian Goggin also said Ireland's long-galloping economy was slowing down this year, although growth remained double the European average.
He said an average 5 percent drop this year in property prices, following a decade when prices tripled or more, meant the bank's mortgage books were growing much more slowly than previously forecast.
But Goggin said this was not bad news in the longer term, arguing that the housing market "fundamentally had got somewhat out of control" and merited "a correction."
"I'm not concerned about the outlook for the Irish economy or housing market. Into 2009 we will see the housing market recover," Goggin said in a phone interview.
Chief Financial Officer John O'Donovan declined to offer any guidance on the bank's likely performance beyond March 2008. "We will grow earnings, it's just a question of how much," he said in a conference call.
Analysts said they were disappointed by the weakening earnings outlook. Bank of Ireland shares dipped 0.57 EUR(US$0.84), or 5.5 percent, to close at 9.83 EUR(US$14.41) on the Irish Stock Exchange.
Its stock has fallen nearly 50 percent from its summertime highs, reflecting wider concerns about banks' exposure to bad loans.