NIB reports €49m loss

NATIONAL Irish Bank (NIB) has reported a net loss of €49 million for the nine months to the end of September, prompted by it increasing its loan impairment charges for the period to €94m.

If that increase were excluded, the bank — which is owned by Danish financial services group, Danske Bank — would have generated a pre-tax profit of €45m for the period in question. However, the bank said yesterday that its impairment charges are only likely to rise in the coming months.

Loan impairment charges basically refer to the amount of money set aside by banks to cover potential bad debts, or loans which they think may not get paid back from customers. NIBs impairment charges — up from just €8m for the first nine months of last year — mainly refer to its loans to the commercial property sector, which make up around 16% of its total €10.5 billion loan book.

The bank’s deputy chief executive Kevin Gallen said that it was impossible to give guidance on how many loans might ‘turn bad’ but added that a further increase in impairment charges could be expected for the final quarter of the current year. Mr Gallen said that the increase in bad debt charges reflected “the very sharp downturn in economic and market conditions together with the outlook for continuing difficult conditions”, but added that the move to raise the figure was in line with the Danske group’s policy of taking a prudent and conservative approach on such matters.

Around 37% of NIBs loan book consists of residential mortgages and on a more positive note, the bank only currently has 100 mortgages which are in arrears — a fraction of the overall number.

The bank’s chief executive Andrew Healy said that underlying performance has been strong and progress has been made but added that the move to increase loan impairment charges was due to the decline in the Irish economy. The bank is forecasting Irish GDP falls of nearly two percent for the current year.

NIBs impairment charges have steadily risen during the year. For the first quarter of this year they were €4.6m, rising to €20.7m in the second quarter and to €68.2m in the last full quarter.

On a group wide basis, Danske reported a pre-tax profit of €1.3bn for the first nine months of the year, down by 38% on the same period last year.