First-half losses at NIB rise 17% to €400m

THE PROPERTY crash has forced National Irish Bank to write down a fifth of its loan book since 2008 as the bank made a loss of €400 million for the first half of the year, 17 per cent worse than last year, as a result of unexpectedly high loan losses.

NIB’s Danish parent bank Danske said that it took a charge of €420 million to cover bad loans in its Irish operations in the first half of the year compared with €376 million during the same period in 2010.

Property development loans were to blame for the losses with further declines in land values forcing NIB to increase its impairment charge on bad loans to €248 million in the second quarter of the year on top of the €172 million charge in the first quarter.

Andrew Healy, chief executive at National Irish Bank, said the bank’s first-half performance “reflects the harsh economic conditions that continue to prevail” and that impairments on loans “remain frustratingly high”.

NIB accounted for 56 per cent of the total impairment charge across the Danske group, which otherwise posted a 32 per cent decline in impairments to €750 million.

NIB and Danske’s Northern Irish operations, Northern Bank, accounted for almost 90 per cent of the group’s impairment charge in the second quarter of the year.

Danske said property values in Ireland continued to fall and “property developers in particular suffered”, and that loan impairment charges in Ireland were “likely to remain high in the coming quarters”. Economic growth was “likely to be weak”, the bank said.

Peter Straarup, chief executive of Danske, told reporters in Copenhagen that the increase in impaired loans in the bank’s Irish operations may have peaked in the second quarter. “We hope that writedowns in Ireland in the second quarter peaked and that we will see a falling trend from now on,” he said.

NIB’s profit before the impairment charge fell 22 per cent to €20 million, despite costs being cut by 18 per cent to €48 million as a result of the reduction in the bank’s workforce and branches.

The cost/income ratio rose by one percentage point to 71 per cent, despite the restructuring. Total income fell 19 per cent to €68 million.

A positive development for the bank was the 21 per cent growth in customer deposits to €5.1 billion during the six months compared with the same period last year.

NIB has taken provisions of €563 million for losses on its property development book, covering more than half the loans in this portfolio. Some €1.5 billion of the €2 billion in loan loss provisions has been taken against the bank’s €3.3 billion commercial property loan book.

Danske reported a 14 per cent increase in first-half profits to €480 million.