Permanent TSB loan losses rise

Irish Life and Permanent's banking business has reported a loss of €424 million for 2011, after it set aside €1.4 billion in loan losses.

The bank blamed "significant deterioration" in its mortgage book and a greater peak to trough assumption of 55 per cent for the decline.

The results refer only to continuing operations at the group, including Permanent TSB and the UK mortgage business Capital Home Loans, and include a gain of €1 billion in capital from the liability management exercise.

Irish Life and Permanent was last week ordered by the High Court to sell Irish Life to the State for €1.3 billion, which will be used to complete the recapitalisation of Permanent TSB as directed under the EU-International Monetary Fund programme.

"With the group on the verge of being broken up, the results are of limited value to investors," Goodbody analyst Eamonn Hughes said. "The main focus is likely to be on impairments at the bank, though the headline figures were already flagged by the company in recent weeks."

Before the impact of this gain and the impairment charges were taken into account, the banking group recorded a pre-tax operating loss of €65 million for the year, compared with a €51 million profit in 2010.

The bank said the turnaround reflected increased costs due to the government funding guarantee, which rose by €76 million, and a €22 million restructuring charge.

Chairman Alan Cook said the banking group's performance reflected the "difficult economic environment" and rising impairment charges in its Irish mortgage book.

"The bank has successfully managed its funding requirements through the year and has made considerable progress in preparing the business for the future in a changed banking market," he said. "A key challenge for the business and for our customers is arrears and we are working hard to manage this situation with our customers and with other stakeholders."

He said the bank was strongly capitalised, with an Equity Tier 1 Capital Ratio of 17.9 per cent as of the end of 2011.

The sale of Irish Life to the State will finalise the €4 billion recapitalisation of Permanent TSB before the separation of the banking and life businesses. The deal, which will be completed by June 30th, will push the State’s bank recapitalisation payouts from €62.4 billion to €63.7 billion.

The Irish Bank Resolution Corporation (IBRC), which is winding down Anglo Irish Bank and Irish Nationwide, has said it is in talks that could lead to it taking on residential mortgages from other banks, including Permanent TSB

However, IBRC chief executive Mike Aynsley said there were a lot of assumptions the Government had yet to work through and discussions with the troika were at early stages.

Shares in Irish Life and Permanent were 6.8 per cent lower at 4.1 cent this afternoon.