BAD property bets, leading to bad banking debts, are expected to wipe billions off the profits of Ireland’s banks over the next year.
Banks that annually pumped out billion euro-plus profits are set to see profits fall dramatically, with pre-tax profits at Bank of Ireland expected to plunge from a forecast €1.99 billion this year to a paltry €37 million by early 2010.
The lost profits will make it almost impossible for banks to pass on expected ECB interest rate cuts, of up to 1.25%, to mortgage holders and businesses.
Share prices have already been punished with the value of Irish financial stocks losing more that €35bn in the last 12 months alone.
Yesterday, stockbrokers Merrion Capital updated their profit projections for the main Irish banks.
Analyst Sebastian Orsi forecasts that AIB’s pre-tax profits will hit just over €2bn this year but will fall to just €144m in 2009, as a result of writing-off bad debts of €2.7bn next year, as banks take account of the property slump.
Mr Orsi expects pre-tax profits of €1.99bn at Bank of Ireland this year to fall to €1.2bn in 2009 and just €37m in 2010. He forecasts a bad debt provision of €2bn in 2010 at the bank.
At Anglo Irish Bank, Mr Orsi expects a bad debt provision of €1.6bn in 2009 to push anticipated pre-tax profits of €1.4bn in 2008 to €225m in 2009.
Irish Life and Permanent’s pre-tax profits are expected to fall this year to €254m from the €461m in 2007.
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