DANISH-OWNED National Irish Bank has said that it will not participate in the Nama “bad bank” plan as the lender posted a pretax loss of €341 million for the first six months of the year.
The bank’s half-yearly loss arose after NIB set aside €379 million to cover bad debts, more than 80 per cent of which was due to soured loans to property developers and land speculators. The loss compares with a profit of €2 million for the same period last year when loan losses totalled €25 million.
Peter Straarup, chief executive of NIB’s parent company Danske, said that the bank had “no plans to abandon the Irish market” after the lender reported a higher-than-expected net loss of 828 million Danish kroner (€112 million) due to a 11-fold increase in loan losses in Ireland, the Baltic and Denmark.
“We’re waiting for the upturn to come one day, and then we’ll be able to get better results in the Irish market,” he said. The outlook for Ireland remained bleak, he said and, in hindsight, the acquisition of NIB in 2005 wasn’t well timed. Mr Straarup said the bank doesn’t plan to participate in any consolidation in the Irish market or in Nama.
Andrew Healy, chief executive of NIB, said that it didn’t have any reason to participate in Nama as its parent company, Copenhagen-based Danske, was “strong” and “well-capitalised”.
“While we won’t directly participate in Nama, we will of course work with Nama where we have mutual clients, taking into account our specific commercial interests,” he said.
He said that, where NIB was part of a lending consortium in a troubled property deal with banks covered by Nama, it would seek to work with them in recovering their loans and would not resort to the courts.
NIB cut its costs by 6 per cent to €63 million in the six months. Mr Healy said the bank had reduced employee numbers by 18 to 631 since last year and let 40 temporary staff go. “We have no plans for a redundancy programme at the moment but it is a situation we are keeping under review,” he said. Mr Healy added that NIB had postponed the opening of six new branches and had closed another three this year.
The loan loss charge for the second quarter totalled 6.8 per cent of loans, which was marginally better than the 7.4 per cent posted in the first quarter, but still ahead of the 5 per cent charge in the final quarter of last year. Non-performing loans totalled 18.2 per cent of NIB’s €10.6 billion overall book.
Mr Healy said that 27 per cent of the bank’s €1.3 billion land and development book was impaired.
He declined to give specific full-year guidance on bad debts. “Impairments will remain high,” he said.
He said that 0.4 per cent of NIB’s €3.9 billion mortgage book, which has an average loan-to-value ratio of less than 60 per cent, was in 90 days’ arrears, representing 68 customers.
He said that the bank was losing money on its mortgages but earning income in other areas by offering the same customers other services in the bank.
“We are probably losing a bit on it,” he said.
Mr Healy said NIB had no current plans to raise its standard variable rate following Permanent TSB’s recent increase. About one quarter of NIB’s 17,000 mortgage customers are on standard variable rates.
Operating profit before bad debts at NIB rose 34 per cent to €38 million, while income climbed 6 per cent to €101 million.
The bank grew deposits by 23 per cent to €4 billion due to higher corporate deposits.
