Losses widened at National Irish Bank last year as the bank faced high impairment charges on its loan book and income dipped.

The bank, which is owned by Danish group Danske Bank, recorded a pretax loss of €805 million, compared with a loss of €618 million a year earlier. National Irish Bank said falling property values kept impairment charges high, reaching €850 million for the year compared with €667 million in 2010.

NIB has taken an accumulative impairment charge over recent years amounting to 26 per cent of the loan book, chief executive Andrew Healy said. Bad debts on the bank’s €3.1 billion commercial property loan book accounted for 80 per cent of the impairment charge.

The higher impairment charges also impacted on the bank’s income, which fell by 13 per cent to €141 million due to a combination of the bad loans and reduced customer demand.

The bank said operating profit before impairment charges was €45 million, 7 per cent lower than the previous year.

However, NIB said a restructuring programme helped drive down costs, falling by 15 per cent to €96 million. Deposit growth, meanwhile, was strong, with the average level rising by 21 per cent.

Andrew Healy, chief executive of NIB, said that the bank had endured a difficult 2011 as house prices continued to fall.

"We have been hit hard again by the loan book," he said. "The impairment charge is inextricably linked to the continuing fall in value of property assets."

Commercial property values have declined by between 60 per cent and 90 per cent from the peak of the market, he said, while residential property prices had fallen by between 55 and 65 per cent.

Mr Healy declined to say when property prices would reach the bottom or when NIB's impairment charge would peak, but that it would remain "elevated" due to further expected falls in the property market and the effect of budgetary measures on customers.

"Confidence is still low, unemployment is still high – the economy is still struggling to a considerable extent. That is not going to feed positively into the property or the banking market," he said.

The bank had noticed residential and commercial property prices stabilising in the prime areas of the country, but that prices had further to fall elsewhere and that the gap between the value of prime and secondary properties was widening and would continue to widen, said Mr Healy.

The bank's staff levels had declined further, to 444 from 482 last year, by departing staff not being replaced. This was in addition to 150 staff who had left the bank under its redundancy programme which has helped to reduce costs by 29 per cent over the past two years.

NIB has no plans to seek further redundancies, said Mr Healy.

Arrears of 90 days or more had increased to 3 per cent on the bank's €3.3 billion mortgage book at the end of 2011 from 1.7 per cent a year earlier. This was well below the industry average of 8 per cent as of September, said Mr Healy, as NIB had avoided 100 per cent and other high loan-to-value loans.

Parent group Danske Bank profit before tax was down 35 per cent to €566 million in the year to December 31st, 2011.

Mr Healy said Danske Bank, remained committed to Ireland and had no plans to sell either NIB or its Northern Irish subsidiary, Northern Bank.