NIB puts aside €379m for bad loans

NATIONAL Irish Bank (NIB) has reported a pre-tax loss of €341 million for the first half of this year, driven by a significant increase in loan impairment charges.

However, it said it will not be selling any of its bad assets to the new National Asset Management Agency (NAMA).

The pre-tax loss for the first six months of this year — down from a profit of €2m for the corresponding period last year — was mainly due to the €379m provision NIB set aside to cover bad loans, or those which are unlikely to be repaid, in the period.

The bulk of the bad loans are located in the bank’s commercial property book, which is valued at €3.3bn.

NIB’s loan book is valued at €10.6 billion. Residential mortgages are valued at €3.9bn. This part of the loan book, according to the bank, is “satisfactory“, as fewer than 100 residential customers are in arrears on their mortgage repayments.

Without the impairment charges, NIB would have posted a first-half pre-tax profit of €38m this year, which would have been a like-for-like increase of 38%. For the record, operating profit in the first half was up by 34% year-on-year, at €38m, and income was up by 6% to €101m.

Although the bank would not give a full-year outlook on impairment charges, the final year’s amount will far outweigh last year, when loan impairment provisions amounted to €228m.

However, NIB deputy chief executive Kevin Gallen said due to the continuing economic slowdown, they would likely stay high for the remainder of the year.

“The impairment charge has been decreasing with each quarter so far this year. For the first quarter it was €198m, and for the second quarter it was €181m, slightly down for the quarter. And hopefully that trend will continue for the rest of the year,” he added.

On the subject of NAMA, NIB said that it wouldn’t be participating in the Government’s so-called bad bank project due to it being part of Denmark’s Danske banking group. However, Danske chief executive Peter Straarup voiced his group’s ongoing commitment to the Irish market, saying that NIB has been “an important strategic investment” for the business and that Danske is “here for the long term.”

That statement was welcomed by banking trade union, the IBOA, whose head Larry Broderick said: “With the major downturn in the economy, the intentions of some financial institutions headquartered outside of Ireland have been called into question in recent months amid fears of a possible retrenchment to their home markets.”