THE DETERIORATING conditions in the North’s economy were blamed by AIB’s Northern Ireland division as the key reason for a substantial jump in half-year pretax losses to £41 million (€48.4 million).

First Trust, which has 47 branches in the North, reported operating profit before provisions of £50 million for the first six months of 2009.

But the bank was also forced to assign £91 million in the same period to cover potential bad loans.

First Trust said it trimmed 7 per cent off its overall costs as a result of “cost management”. It also cut staff costs by 13 per cent by reducing employee numbers and implementing a freeze on pay and performance-related bonuses.

First Trust has blamed its exposure to rapidly falling property values as one of the drivers for the increase in its “loan impairments” for the first half of the year.

Net interest income earned by First Trust was 16 per cent lower in the period under review when compared to corresponding results for 2008.

The bank, which employs 1,700 people in Northern Ireland, reported lower deposit margins in the first half of the year due to a combination of lower interest rates and increased competition in the market.

First Trust said it had partly countered this downturn by improving its lending margins through “the repricing of customer loans to reflect market conditions”.

Overall, the bank saw customer deposit balances grow by 4 per cent on the previous year’s figures as a result of several issues of fixed-rate deposit bonds which attracted new customers.

The bank, which is one of the big four in the North – which also includes Northern Bank, Ulster Bank and Bank of Ireland – reported a sharp 28 per cent fall in other income sources during the first half of the year.