National Irish Bank (NIB) today said its nine-month loss widened after a surge in bad-loan provisions.
The pretax loss of €496 million compared with a year-earlier loss of €49 million, Dublin- based NIB, a unit Denmark's Danske Bank, said in a statement today. The bank set aside €544 million against problem loans, up from €93.8 million a year earlier.
Ireland is mired in a "deep recession" and the rise in loan provisions reflects a slump in property values, the bank said. Irish house prices have fallen 25 per cent since their peak in early 2007, mortgage lender Irish Life & Permanent said on October 31st.
"Our priorities in this environment are to continue to work closely with our customers through the challenges they face and to manage our costs," NIB chief executive officer Andrew Healy said in a statement.
Income fell 4 per cent from a year earlier to €139 million. Deposits grew 26 per cent from a year earlier as corporate deposits rose 85 per cent rise and retail deposits fell 18 per cent.
NIB owner Danske Bank Group, which released its financial results for the year to the end of September 2009, reported operating profit at its Irish operation rose 6 per cent to €48 million, but income fell 4 per cent to €139 million. Costs were down 8 per cent to €91 million.
Danske Bank Chief Financial Officer Tonny Thierry Andersen said the bank is not in talks with Mark Duffy and the Asset Resolution Corp company he has set up to buy souring loans from foreign banks in Ireland, who cannot sell them to the National Asset Management Agency.
Danske Bank will "deal with it ourselves and try to work out the loan book" and has sent very experienced people from Denmark to Ireland to handle the situation, he said in an interview today.
Mr Andersen said although total loan losses on a group level have peaked, it is “too early to say that you have seen the worst” in specific countries. Ireland is “an issue” and the Baltics is “a big challenge” for banks, he said.
Danske, Denmark's largest lender, said its third-quarter profit declined almost 50 per cent after losses on bad loans in Denmark and Ireland increased. Net income fell to 583 million kroner (some €78 million) from 1.1 billion kroner a year earlier.
Danske saw operating profits increase 97 per cent to €3.2 billion, with income up 48 per cent to €6.2 billion. The group has set aside €2.8 billion for its loan impairment charges.
Commenting on the results, Mr Healy said: "National Irish Bank’s results are in line with expectations against the background of extremely difficult economic and market conditions. Reflecting strong cost management, operating profit increased 6 per cent, but loan impairments continue at high levels.
He said although there were signs of economic recovery internationally, Ireland is "still in deep recession and has some way to go before turning the corner".
Elsewhere, the Lloyds Banking Group, which owns Bank of Scotland (Ireland) said it expects a “high level” of loan impairments at its Irish banking unit in 2009 and 2010.
Additional reporting Bloomberg