NIB sets aside €667m in bad debt charges
The write-offs led to a pre-tax loss of €618m for the year to end December 2010.
Danske Bank Group, the parent of NIB, yesterday reported a strong surge in pre-tax profits of 36% to €865m.
It has set aside €1.85bn for impairment charges, a figure that was down sharply on the previous year.
NIB’s chief executive Andrew Healy, said the bank cannot rule out further serious write-offs in 2011 and further erosion of commercial property prices.
The bank had hoped to see “some stability” in the sector this year, “but we could see further falls”, he said.
Conditions remain very difficult, the bank said.
It added it acted quickly to deal with the challenges faced by all banks operating in Ireland.
“Our reduced cost base and improved operating profit are positive signs, and while impairments remain very high, they are lower than last year.”
The bank reported a pre-tax loss of €618m on the back of the severe bad debts. Operating profit before impairment charges of €49m was achieved, an increase of 16%.
In the tough trading environment income was down 9% to €162m, reflecting reduced customer demand and the impact of the impairment charges.
Costs fell 16% to €113m, largely driven by the bank’s restructuring programme.
That has seen the number of branches slashed from 60 to 28 branches, Healy said.
Staff have made “an enormous contribution to the bank’s future by implementing changes that were difficult but necessary,” he said.
The bank had no plans at present to increase variable mortgage rates and has kept its variable mortgage rates unchanged since the first half of 2009.
Its €3.5 billion mortgage book remained relatively strong with less than 300 customers in arrears.
Healy said the bank took a determined stance on mortgage lending with loan to value ratios kept on a tight leash.
Despite that “we did grow out mortgage book quite well,” he said.
With interest rates likely to go up and “unemployment” a key concern, Healy expects to see increased pressure on the mortgage loan book in the current year.
Its total loan book stood at €9.4 billion, down 8% on the previous year. Commercial property loans amounted to €3.3bn, with most of the loan impairment charges in this area.
Total deposits amounted to €5.3bn, up 28%.
Looking ahead Healy said he remained “very cautious.”
The outlook is “very much dependent on the economy and where property values go,” he said.
Business will also be looking to the new government to bring “some certainty to the current fiscal position”.
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