NIB provides for €198m bad debts

BAD debt provisioning at National Irish Bank of €198 million in the first quart of this year is close to the total amount of €228m set aside last year.

The provision is a further reflection of the worsening state of the Irish property market.

The group’s parent bank, Danske, said bad debt provisioning at its Irish subsidiary had gone up 40-fold, adding it was sending “senior people” to Dublin to deal with the crisis.

Danske, which is Denmark’s biggest lender, also suffered massive bad debts for the first three months of 2009 which shot up from €100m in quarter one of 2008 to a whopping €1.1 billion for the first three months of 2009.

National Irish Bank said operating profits rose 90% to €21m in the first quarter of 2009 as a result of cost cutting while income rose by 12% to €52m.

Chief executive, Andrew Healy, said the Irish bank’s focus on cost management was going well with costs down 13% to €31m in the three month period.

“However, given the further deterioration in economic conditions, we have again this quarter set aside a substantial amount for potential loan losses”, he said.

Danske Bank reported that its net profit for the first quarter fell from €300m in 2008 to €200m while its income rose by 67% to €2.3bn.

Commenting on the Irish situation, chief financial officer, Danske, Tonny Thierry Andersen said: “You have to go deep into 2010 before you’ll see any changes in Ireland. They are fighting with challenging housing prices, a budget deficit and raising taxes.

“We’ll make sure we send some of our more senior people there to help the Irish operations, as they don’t have a history of dealing with such a downturn”.

Danske Bank will focus on the asset quality of its Irish unit and cutting costs, he said.

The bank has no plans to exit any of the markets it operates in, including Ireland, he added.

“You cannot live your life backwards and it was a good decision then, but in hindsight the timing was not good,” Andersen said.

“But we are in Ireland now and we have a good basis once crisis is over.”

Nordic banks are facing soaring loan losses in markets outside their home countries.

Sweden’s Swedbank AB and SEB AB, the largest banks in the Baltics, have been forced to raise capital from shareholders to deal with increasing bad loans in Estonia, Latvia and Lithuania.

Danske acquired National Irish Bank in 2005 and also operates in Northern Ireland, the Nordic countries and in the Baltics.

Irish loan impairment charges, most of which are provisions for potential future loan losses, soared to 7.4% of total loans in the first quarter from 0.19% in the same period a year earlier after lending to property companies soured.

Additional reporting Bloomberg.