NIB exposure ‘to stay high’

NATIONAL Irish Bank has said that it expects impairment levels to remain high next year, but not to increase any further than was evident in 2010.

The bank added it still feels its loan impairment levels — basically, the amount set aside to cover non-performing loans — peaked during the second quarter of this year.

“We hope that the gradual trend of declining impairments will continue, but of course there can be no guarantees,” chief executive Andrew Healy said in an analyst and investor briefing held by the bank’s Danish parent, Danske Bank, yesterday.

In its results for the first nine months of the year, issued back in September, NIB reported a pre-tax loss of €468 million and a loan impairment charge of €504m; albeit both of which were slightly down on a year-on-year basis.

NIB’s impairment charges chiefly reflect its commercial property lending activity. Mr Healy added that impairments will remain high “due to the continuing fall in property value/collateral“, but also said that 2011 impairments will relate to customers already impaired and not new cases.

“While the [Government’s] austerity measures don’t help, they haven’t materially changed our expectations,” he added.

The bank’s business lending book — including to SMEs — accounts for 25% of its total loan book and 11% of its impairments. However, yesterday’s update also detailed how deposits have risen of late, with average balances up by 14% on a year-on-year basis in the third quarter of the year.

The bank recently said that it would be increasingly looking to focus on corporate and wealthy private clients in the future.

Mr Healy said that NIB’s restructuring moves — including cost-cutting measures such as reducing staff numbers by 20%, closing more than half of its retail outlets and merging with An Post for over-the-counter services — have “moved our organisation to a position which provides us with a good platform for growth” and will benefit the company’s 2011 full-year results. The bank is forecasting GDP growth of 0.9%, for the economy next year, to be driven by continued export growth.