Some mortgage debt will be written off, admits NIB chief
NATIONAL Irish Bank chief Andrew Healy yesterday admitted that his bank was likely to write off some mortgage debt as a result of the Government's new insolvency rules. However, he insisted that the proposed regime would not trigger massive losses or widespread debt forgiveness.
The comments came as Mr Healy said NIB's parent Danske was "absolutely" committed to a long-term future in the Irish market, even though the Irish unit's provisions for bad loans came in at €850m last year and are likely to "remain elevated" in 2012.
Commercial loans were once again the worst performer for NIB last year and Mr Healy said 42pc of the bank's €3.1bn commercial-property portfolio was now classed as "impaired".
Impairments on the bank's mortgage book are running at only 4pc in value terms.
Mr Healy said just 3pc of the bank's loans -- or about 500 customers -- were in arrears of more than 90 days at the end of December. The market-wide rate is 8.1pc.
Ratings agency Moody's this week suggested that as much as 25pc of Ireland's total mortgage pool was "susceptible" to being captured by new insolvency measures that allow individuals to be relieved of mortgage debt if a majority of their creditors agree to write-downs. It said the measures would "discourage" people in negative equity from paying their mortgages and could lead to "widespread debt forgiveness".
Mr Healy yesterday stressed that "ability to pay" had more influence on mortgage arrears than negative equity, commenting: "It's very difficult to see how the rules will work until we have more detail but it may help to crystallise things with borrowers."
He insisted NIB was not expecting a significant deterioration in its mortgage book once the rules kick in but said the bank would be prepared to write off some home loan debt.
"It could make sense in certain situations," he said. "Banks have to be realistic and this may help, but we'll have to wait and see. What's important is that everything is looked at on a case-by-case basis."
NIB's overall view, he said, is that mortgage impairments will "continue to trend upwards as they have done steadily over the past year".
Despite the higher loan losses and a 7pc fall in pre-impairment profits, Mr Healy said the "underlying" business was "solid". NIB has taken out about a third of its cost base in recent years after closing branches and shedding staff.
The bank has also grown its corporate business and deposits "continue to perform well". NIB had almost €5.1bn of deposits at the end of last year, down about €200m year-on-year.
The Irish unit's pre-tax loss of €805m was more than the €566m made across the entire Danske group. Mr Healy said Danske was committed to NIB, which it bought for €1.4bn in 2005.