Tuesday 23 May 2017

BoSI setting aside €3.3bn to cover bad loan losses for 2009

Bank warns that a third of its €32.5bn loan book is impaired

Bank of Scotland (Ireland) is closing its Halifax branch network
Bank of Scotland (Ireland) is closing its Halifax branch network

Joe Brennan

BANK of Scotland (Ireland), which is closing its Halifax branch network, warned yesterday that a third of its £29bn (€32.5bn) loan book is impaired. It set aside £2.95bn (€3.3bn) to cover losses on bad loans for 2009.

Tim Tookey, finance director at BoSI's parent, Lloyds Banking Group, told analysts he believed the Irish bad debts had peaked -- prompting analysts to speculate that the group had 'kitchen-sinked' its problems here.

However, in its results statement, Lloyds said it remained "cautious on the Irish portfolios, given the uncertain economic outlook".

BoSI's impairment losses for last year equate to 10pc of its loan book. Lloyds, which pumped €3.45bn of fresh capital into BoSI, did not disclose the bank's overall loss figure.

The Irish unit is now included in Lloyd's wealth and international division.

Impairments

The broader Lloyds Banking Group, which is 43pc owned by the UK taxpayer, chalked up a £6.3bn loss last year as it wrote down £24bn of bad loans.

Most of the impairments stem from its rescue takeover of BoSI's Scottish owner, HBOS, in late 2008.

BoSI said its commercial-property portfolio accounted for 61pc of the total impairment charge. The bank took a 15.3pc average writedown on this part of its loan book, which Merrion Capital analyst Sebastian Orsi said was in line with what the market had factored in for Irish banks in general.

"The severe economic downturn has significantly influenced performance, with commercial property prices falling approximately 55pc from their peak, house prices falling approximately 31pc from their peak and unemployment levels currently at 12.5pc," Lloyds said.

All told, BoSI has set aside £3.6bn (€4bn) of provisions to cover expected losses on its portfolio.

BoSI announced earlier this month that it would close its 44 Halifax branches and broker-sourced business by the end of July, to focus on business banking, which is largely a legacy of its 2001 purchase of ICC bank. It plans to axe 750 of its 1,600-strong workforce.

The group's loan book fell to £29.1bn at the end of December from €31.4bn a year earlier.

BoSI has put a large portion of its commercial-property portfolio into a new business-support unit.

Local management has rejected suggestions that this unit is tantamount to an internal 'bad bank' and said it was "responsible for managing customers who are most affected by the tough economic times".

Irish Independent

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