Early mortgage arrears at ILP level off

IRISH LIFE Permanent has said early-stage mortgage arrears have levelled off since May, while those over a longer period continue to rise.

In an interim management statement it said arrears in consumer finance continue to decline in both categories.

The group, which made a loss after tax of €313 million in 2009, said operating profits were expected to make a strong recovery for 2010, increasing in the order of 70 per cent.

Operating costs in the retail and corporate life divisions were now down almost 20 per cent on peak, the group said, while bank operating costs were expected to fall by 4 per cent this year following a 10 per cent reduction in 2009.

It said recovery in its life and investment business was well established, and the banking business continued to progress its key priorities.

Efforts to improve its banking funding position had been disrupted by market conditions. Corporate deposits reduced to €4.8 billion from €5.4 billion in the third-quarter, but have been stable since the end of September.

They are expected to remain so as almost all are sourced domestically.

Retail deposit inflows are expected to be between €700 million and €800 million during the second half of the year.

ECB drawings are currently €11.7 billion, but the group plans to raise term funding outside the State guarantee using its UK residential mortgage assets as security.

These should reduce the ECB funding, it said.

The group currently has €5.5 billion in ECB eligible securities and has term debt maturities in 2011 of less than €2 billion.

Analyst Stephen Lyons of Davys said it was good news that ILP’s deposits were stable and that it did not appear to have funding problems.

It was even better news, he said, that residential mortgage arrears of less than 90 days had levelled off.

“It does show that the doomsday scenario that was painted by some is far too pessimistic.”

He said the group’s performance was good in the circumstances but would be overshadowed by the general turmoil in the sector.

NCB, in its response, noted that the group’s funding position remained robust, but also noted that the prospect of shareholder dilution in Irish banks had increased in recent days as the Government deliberates with EU and IMF officials on the best way to rehabilitate the ailing sector.

Bloxham said the statement was broadly in line with expectations. Credit quality in the residential book had stabilised since May in line with the trend seen in employment, and estimates for full-year impairment provisions were 10 per cent to 15 per cent below 2009 levels.

Despite the analysts’ views that the statement would be overshadowed by possible European intervention, the ILP share price finished the day up 5 per cent at €0.86.