Danske 'committed' to NIB despite €420m commercial losses
Published 10/08/2011 | 05:00
LOAN losses at National Irish Bank rose to a "frustratingly high" €420m in the first half of the year as the "very challenging" economic climate triggered a massive hit on the bank's commercial property loans.
NIB chiefs yesterday warned that while they were expecting lower future losses on those books, personal loans are set to come under pressure as "tough austerity", high unemployment and falling property prices take their toll.
But despite the bleak picture, NIB boss Andrew Healy insisted his bank's Danske owners remained "strongly committed" to the Irish market, a statement "welcomed" by the Irish Bank Officials' Association (IBOA).
The latest loan losses pushed NIB to pre-tax losses of €400m for the half-year, a daunting figure for a bank with a €9.1bn loan book and significantly worse than the €341m lost in the first six months of 2010.
In a group context, the Irish hit accounted for more than half the €750m loan impairments across Danske and was heavily discussed on an earnings call with European financial analysts.
The bank stressed that the troubled €3.3bn commercial property portfolios accounted for "almost 100pc" of impairments in the second half of the year, with investment property hit hardest as falling rents crippled customers' repayment capabilities.
"Impairments against personal lending remained low," Danske chief Peter Straarup told analysts.
"Because of the tough austerity measures in Ireland combined with higher unem- ployment and falling house prices, we expect that the losses could spread to other segments, including personal customers."
Mr Straarup later clarified that while he expected Irish loan losses to remain "high" over the coming periods, they should be "lower than" the second quarter which had "very high" impairments.
In a statement on the Irish performance, NIB described the quality of its €3.4bn mortgage book as "satisfactory".
Beyond the impairment charges, yesterday's figures showed NIB's net interest income contracted from €73m in the first half of 2010 to €61m in the same period this year, while costs fell from €58m to €48m. The cost savings follow an extensive restructuring programme that saw NIB close 21 branches and shed some 150 staff.
"Our restructuring programme is delivering benefits to the bottom line," Mr Healy said. "We believe the changes we have made to our business create a good platform for growth once conditions improve."
The bank's deposits, meanwhile, rose 21pc to €5.1bn, as Irish savers flocked to the safe haven of Danske's A rating, several notches above the government-guaranteed Irish banks.
As a branch of Danske, rather than a subsidiary, NIB has full access to Danske's liquidity facilities.