National Irish Bank has reported a pre-tax loss of €618 million for 2010 as loan impairment charges continued to hamper results.

But the €667 million set aside for bad loans last year was €37 million lower than 2009, and the bank said there were positive signs as it cut costs and increased operating profit.

Although income fell 9 per cent to €162 million as customer demand dipped and the effect of impaired loans was felt, a restructuring programme at the bank saw costs decline 16 per cent to €113 million.

The Irish unit of Danske Bank had a total loan book of €9.4 billion, down 8 per cent on the previous year. Of this figure, €3.3 billion were commercial property loans, an area that accounts for most of the bank's loan impairment charges.

The bank said less than 300 customers in its €3.5 billion mortgage book were in arrears. Total deposits at the bank rose 28 per cent to €5.3 billion.

Last year, Danske Bank had warned impairments at the Irish unit would remain high in 2011, as Government austerity measures hurt demand and intensified cash-flow pressure in the commercial property market. It also said austerity measures and difficulties in the Irish banking sector were also likely to dampen supply and credit demand in the residential property market.

This morning, chief executive Andrew Healy said conditions were still difficult, but the bank had acted quickly to deal with the challenges faced Irish banks.

"Our reduced cost base and improved operating profit are positive signs and while impairments remain very high, they are lower than last year," he said.

"Our restructuring programme has been completed ahead of schedule. Our staff have made an enormous contribution to the bank's future by implementing changes that were difficult but necessary. National Irish Bank is well positioned for a banking landscape that has changed radically."

Profit at the wider Danske Bank parent group was up 36 per cent to €865 million for the 12 months.