NIB loan losses hit €367m as it faces into tough year
But parent company Danske predicts bank can return to profit by 2012
Published 11/08/2010 | 05:00
NATIONAL Irish Bank yesterday admitted 2010 was shaping up to be "just as bad" as 2009, which the bank dubbed "possibly the worst year in Irish banking history".
But parent company Danske Bank struck a brighter note, suggesting its Irish offshoot could return to profit by 2012 reversing the massive losses of the last 18 months.
The commentary came as National Irish Bank (NIB) unveiled another €367m of loan impairments in the half-year to June, down only marginally on the €371m bad loan hit taken in the same period a year earlier.
"It's probably just as bad as last year," NIB deputy chief executive Kevin Gallen said yesterday, reflecting on the 2010 conditions.
"We'd be very cautious in terms of calling a peak in impairments ... the issue is that property prices continue to fall."
Troubled commercial property loans made up "more than 80pc" of the latest round of mark-downs, with most of the remainder taken up by "other commercial loans", mirroring NIB's experience in 2009.
Some analysts suggested the harshness of the latest markdowns might have been prompted by the 50pc haircuts applied by the National Asset Management Agency (Nama) to troubled loans transferred by domestic banks.
"Nama has been a factor but we have to take our own independent view on a case-by-case basis," Mr Gallen stressed, pointing out that NIB had been proactive on write-downs since the crash begun.
While NIB's business banking has been hit by hefty write-downs, Mr Gallen said his bank's mortgage lending had "held up well" with just 250 of its 20,000 policies in arrears.
Mortgages make up €3.6bn of NIB's €10bn book, with the bank focusing heavily on the "upper end" of the market. NIB yesterday confirmed it had "no plans" to follow competitors who've recently increased mortgage rates.
The commitment to hold mortgage rates came despite a 32pc fall in NIB's operating profit over the first half, as high deposit rates and low lending rates squeezed margins.
Mr Gallen said NIB was able to hold mortgage rates steady because it was a branch of Danske and was "very well funded".
"We don't have the same challenges the other Irish banks have regarding the cost of funding," he stressed. He added that NIB expects "pressure on the operating line to continue for the rest of the year" as deposit interest rates remain high.
Last December NIB embarked on a restructuring plan that will see its headcount reduce by 25pc and branch numbers cut in half.
In a conference call, Danske Group chief executive Peter Staarp said the Irish unit could be profitable by 2012. That profitability would be a sharp turnaround from yesterday's pre-tax result, which showed losses of €341m for the first six months, identical to losses for the first half of 2009.
Despite those bruising losses, Danske yesterday insisted it was committed to the Irish market, with chief executive Andrew Healy (above) describing the Danish bank's support as "unflinching".
Some Irish analysts are unconvinced, with Davy's suggesting NIB's decision to end cash services at its branches "points towards a phased withdrawal from the country".