Irish banks may turn a profit next year

Fitch Ratings raised the prospect of Irish banks reporting a profit next year, helped by releasing funds set aside to cover bad-loan losses from Europe’s worst property collapse.

Ireland’s banks will probably increase loan-loss impairment charges this year after the Central Bank reviewed their balance sheets, Denzil De Bie, a Fitch analyst, said on a conference call from London yesterday.

Bank of Ireland said on Dec 2 the regulator estimates the nation’s largest bank may need to increase provisions by €1.1bn ($1.5bn).

“By taking the impairments now, that should put them in a position that they are better able to withstand European asset-quality reviews” next year, Mr De Bie said. “There may be future write-backs possible in 2014, 2015, 2016.”

The government committed €64bn to shore up the banks over the past five years.

Finance Minister Michael Noonan said on Dec 6 there’s no evidence the lenders will need additional capital as they face a third round of European stress tests next year.

The country agreed to carry out a balance-sheet assessment of its banks last month before the Government exited a three-year international bailout yesterday. Bank of Ireland and the other two banks reviewed, AIB and Permanent TSB, each said they didn’t need more capital.

“The results of the assessment indicate that higher provisioning levels are appropriate for some loan portfolios,” the European Commission said on Dec 13.

Still, the banks have enough capital to keep their core Tier 1 ratios, a gauge of financial strength, above a 10.5% Irish regulatory requirement, it said.

Bank of Ireland may post a €589m net loss this year, according to the median estimate of analysts. AIB, which is 99.8% state owned, may report a €1.1bn-euro loss, according to Dublin-based Merrion Capital.

A “frontloading” of loan-loss provisions this year “should improve the quality of earnings in 2014, ’15, 16,” Mr De Bie said.


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