NIB reports €401m pretax loss

THE CHARGE for bad loans at National Irish Bank will remain high for the remainder of the year before falling, the head of the Danish bank’s Republic of Ireland operations said, as the bank reported a pretax loss of €401 million for the first half of the year.

Loan impairments fell 7 per cent to €391 million for the first half, but NIB made a similar loss to the deficit posted for the first six months of 2011 as costs increased by 54 per cent to cover the closure of the bank’s 27 branches and laying off a further 100 staff.

“We would probably see them [loan impairments] flat-lining for a couple of quarters before falling,” said Terry Browne, country manager for Republic of Ireland operations at Danish bank Danske.

The bank has taken €2.6 billion of provisions, or 32 per cent of total loans, to cover bad debts since the crash of 2008. NIB’s loan book stood at €8.3 billion at the end of June, a reduction of 9 per cent in a year.

Costs of €78 million in the first half compared with €48 million in the same period last year and left an operating loss of €10 million at NIB before the bad debt charge.

Mr Browne said the increase was a one-off and related to the cost of ending leases on branches and redundancy payments to staff as the bank’s employees in the Republic falls to 343. It will close the branches and rebrand the bank in the Republic to Danske on November 15th following a restructuring plan announced in June.

Deposits at NIB fell 39 per cent on the first half of last year to €3 billion at the end of June due to a downgrade of Danske’s credit rating and increasing competition for deposits in Ireland.

Mr Browne expects residential property prices to fall by between 55 per cent and 60 per cent from peak levels in 2007 and estimated prices were about that level now.

Danske chief executive Eivind Kolding said the bank may be able to pay first post-crisis dividend on 2012 earnings after Denmark’s biggest lender posted a better than expected profit of €1.5 billion, up 22 per cent on last year.

The bank’s bad debt charge rose to €946 million from €750 million on the loan losses in Ireland, personal customers in Denmark and losses from the shipping industry.