IL&P impairment charges triple as home arrears rise
Published 29/02/2012 | 05:00
IRISH Life & Permanent said 11.5pc of Irish mortgages in its banking unit were more than 90 days in arrears at the end of December, prompting it to increase impairments for loan losses to €1.4bn in 2011.
The bank's arrears are worse than the 9.2pc average arrears level across the market.
Its impairment charges against troubled loans more than tripled last year as the plc pencilled in a bigger fall in house prices, adopted new provisioning rules and dealt with a sharp rise in mortgage arrears.
IL&P made the unscheduled announcement about its €1.4bn of provisions after markets closed last night and said "almost all" of the increase was "attributable to the Irish residential mortgage loan book".
The decision to set so much aside for loan losses was taken at a board meeting yesterday and announced afterwards because "directors have a responsibility to update the market" on material developments "at the earliest possible stage", a spokesman said.
IL&P is 99.8pc owned by the State, the future of its Permanent TSB bank is up in the air and the subject of live negotiations between the Irish authorities and the EC/ECB/IMF, but the company must still comply with normal market rules since it remains listed.
Those rules dictate that the 2011 impairments had to be reported because they were far worse than market expectations, effectively making them a profit warning.
The €1.4bn is more than half the loan losses Permanent TSB was expected to make from 2011 to 2013 under the 'base case' in last year's stress tests.
The adverse scenario had the bank making €3.4bn of impairments, including almost €2.7bn on mortgages.
In a statement, IL&P attributed the higher charges on its €26bn Irish residential mortgage book to "a change in the assumptions" for house price falls, new provisioning guidelines from the Central Bank and "a significant increase" in arrears.
IL&P had been expecting a 'peak to trough' fall of 43pc in house prices, implying the average gap between the highest prices and the lowest prices would be 43pc.
That boom-to-bust fall is now expected to be 55pc.
The soaring arrears levels that left 11.5pc of IL&P's Irish mortgages more than 90 days overdue by the end of the year, is up from the 6.8pc arrears level a year earlier.
The statement stressed that Permanent TSB's 'Tier 1 capital' -- a measure of its equity and reserves against loans -- came in at 18.3pc at the end of December even after the €1.4bn of impairments had been factored in.
IL&P is far from the only bank suffering a tougher time on the mortgages front.
Bank of Ireland last week said that 5.6pc of its owner-occupier mortgages were in arrears of more than 90 days.
However, the bank added that arrears rose in the second half of last year amid "considerable speculation" about proposals to help people struggling to pay.