BoI believes €6bn is worst case scenario for write-offs

BANK of Ireland believes that in a worst-case scenarios it will have to write off €2 billion a year in bad loans to 2011 – at best, the write-offs will total €4.5bn.

Bank of Ireland chairman, Richard Burrows, spoke with reporters on the company’s outlook for bad-loan impairments, on the sidelines of a conference in Kyoto, Japan.

“Our base case scenario through to 2011 is to see a loan impairment of around €4.5bn,” he said.

“In a worst-case scenario, we would see an impairment of around €6bn, and the most recent information suggests that in fact the situation is moving toward the worst-case base scenario.”

Commenting on Bank of Ireland’s capital and the Irish Government’s plan to buy loans, Mr Burrows, who is stepping down in July, said: “The situation has stabilised quite a bit since we got recapitalisation, and we are now looking forward to negotiations with the Government on the transfer of assets.

“The Bank of Ireland is adequately capitalised. We have been pretty clear that the stress testing we did prior to receiving government capitalisation of €3.5bn showed we had sufficient capital.”

Mr Burrows said the latest information on the Irish economy shows that the rate of decline is slowing.

“That is itself somewhat indicative that perhaps we are seeing the bottom of the recession in sight,” he added.

On the company’s business in Britain, he said: “We have a very important joint venture with the Post Office, which is performing well.

“Bad loans there are pretty stable.”

And Bank Zachodni WBK SA, the Polish unit of AIB, was downgraded to “sell” from “neutral” at UBS AG on valuation, according to a research report.