Irish bank profits to be slashed by debt write-offs

MASSIVE bad debt write-offs are expected to cut billions of euro off the profits of Ireland’s main financial institutions — AIB Bank, Bank of Ireland, Irish Life and Permanent and Anglo Irish Bank — over the next 12 months.

Wed, 29 Oct, 2008 - 00:00

The banks shares prices have already been punished with the value of Irish financial stocks losing more that €35 billion in the last 12 months alone.

Yesterday, stockbrokers Merrion Capital updated their profit projections for the main Irish banks and the results show massive falls in profits at all the main banks.

Analyst Sebastian Orsi forecasts massive falls in pre-tax profits at AIB, Bank of Ireland and Anglo Irish Bank which are expected to lose their billion euro profits plus status over the next 12 months.

AIB’s pre-tax profits are expected to hit just over €2bn this year but to fall to just €144 million in 2009 as a direct result of writing-off bad debts of close to €2.7bn next year as banks take full account of the property slump and its impact on their loan books.

Mr Orsi’s projections for Bank of Ireland are equally gloomy. Bank of Ireland is not expected to report the full impact of the write-downs until its 2010 accounts are filed in March of that year.

Mr Orsi expects that pre-tax profits of €1.99bn this year to fall to €1.2bn in 2009 and a paltry €37m in 2010. Mr Orsi forecasts a bad debt provision of €2bn in 2010 at Bank of Ireland.

At Anglo Irish Bank Mr Orsi expects a bad debt provision of €1.6bn in 2009 to push anticipated pre-tax profits of €1.423bn in 2008 to €225m in 2009.

Irish Life and Permanent’s profits are also expected to plunge but the former building society’s pre-tax profits are expected to take their biggest hit this year when profits are expected to fall to €254m from €461m in 2007.

And the latest figures from the Irish Central Ban shows that Irish-based bank borrowings from the European Central Bank (ECB) have rocketed over the past 12 months to a record €58.67bn at the end of September, up from €23.75bn at the end of September 2007. The previous high was €44.12bn at the end of July.

At the end of September financial institutions operating in Ireland, including the IFSC, had outstanding borrowings €58.67bn from the ECB.