Non-performing loans push NIB losses up to €400m

A €50 million year-on-year increase in impairment charges to cover non-performing loans pushed pre-tax losses at National Irish Bank (NIB) up to €400m in the first half of this year.

That figure was up from a loss of €341m for the first six months of 2010. The main driver in the loss increase was the jump in first half impairment charges from €367m to €420m; a disappointing development attributed by NIB’s chief executive Andrew Healy to the continued decline in property values.

“Performance for the first six months of 2011 is broadly in line with expectations and reflects the harsh economic conditions that continue to prevail,” he said. “While our restructuring programme is delivering benefits to the cost line, impairments remain frustratingly high and are caused, in the main, by the continued decline in property values.”

Despite the poor figures — operating profit, before impairments were noted, was down by 22% year-on-year to €20m — NIB’s Danish parent, Danske Bank has said that it remains “strongly committed” to its Irish operations, a statement welcomed by the bank workers’ union, the IBOA.

“We believe the changes we’ve made to our business create a good platform for growth once conditions improve,” Mr Healy said.

Despite the increase in loan losses, NIB said that the quality of its €3.4bn mortgage book remains “satisfactory”. Most of the impairment charges covered commercial property loans, which amounted to €3.3bn in total in the first half of the year. NIB’s total loan book amounted to €9.1bn, as of the end of June, down by 9% on the corresponding period last year. Operating costs fell by 18% and customer deposits increased by 21%, to €5.1bn.

NIB didn’t say if it still believes that this year’s full-year impairment charges shouldn’t be greater than 2010, but it had expected levels to remain high this year. It did confirm, however, that instances seen in the first half of this year only relate to already impaired customers and not new cases.

On a group-wide basis, Danske yesterday reported a 14% year-on-year increase in first half profits to €480m and set aside €750m to cover impaired loans.