Rise in impairment charges raises fears

THE £500 million (€362m) increase in Ulster Bank’s annual impairment charge for non-performing loans has put commentators on high alert over a potential domino effect concerning the other domestic Irish banks — with each expected to report annual results in the coming months.

Before Ulster Bank reported impairment charges of £1.16bn, for 2010, yesterday (a figure which was up from £649m the previous year), Irish Life & Permanent (IL&P) set the ball rolling. It said — just last week — that its 2010 results, which are due out next week, are likely to show an €80m-€100m annual increase in impairment charge.

“Recent securitisation data has shown Ulster Bank — through First Active — to have the highest arrears levels, so it now appears these higher arrears are starting to translate into higher impairments. This is something that must be watched in the other domestic banks and, for instance, follows the uplift in mortgage impairment provisions guidance reported by IL&P in its interim management statement last week,” said Eamonn Hughes of Goodbody Stockbrokers yesterday.