National Irish Bank reports losses of €552m

NATIONAL Irish Bank (NIB) has reported a pre-tax loss of €552 million for 2008 — brought about mainly by an increase in the amount of money it set aside for losses arising from “bad” loans.

The Irish banking division of Danish group, Danske Bank, actually made a profit of €71m before impairment charges are taken into account, saw income rise by 13% and costs fall by 12%. However, it also reported loan loss impairments of €228m; while Danske announced a one-off goodwill write-off of €395m in NIB’s total value — hence the overall loss for the year.

While NIB’s total loan book is valued at €10.7 billion, the €228m loss impairment represents 2.14% of loans. The vast majority of the “bad loans” — around 75% worth — are linked with commercial property clients. The bank’s exposure here is valued at around €3.5bn, while only a minimal amount of bad debts come from residential mortgage holders.

Yesterday’s bad news from NIB cannot have been totally unexpected. Last October, when the bank reported a net loss of €49m for the first nine months of 2008, it said that further impairment charges for the full year were likely.

NIB chief executive Andrew Healy called the full-year figures “stark” yesterday, but said that they were mainly made up of the one-off write-off and the bank’s “realistic view of likely bad debt losses in the worst economic recession in our lifetime.”

“What is important for customers and staff is that NIB is well-capitalised, deposits are guaranteed and we’re part of a strong international group which is fully committed to Ireland.”

Mr Healy said management was confident of emerging “well-positioned” from the current recession, with the plan for this year including an increased focus on business banking and a further 10% reduction in costs.

Also, while the bank has not replaced contract and temporary staff members who have been laid off in the last year, no redundancy programme is planned at present.