NATIONAL IRISH Bank made a loss of €600 million in the first nine months of the year, €132 million worse than the same period last year, after reporting higher-than-expected bad debts during the third quarter.
The bank’s Danish owner, Danske, said NIB and its Northern Ireland bank, Northern Bank, posted substantial bad-debt charges due to “persistently difficult market conditions”. NIB’s bad debts totalled €632 million, mostly on commercial property loans, up from €504 million for the same period last year.
“Impairments remain very high, mostly due to the continued weakness of the property market in Ireland,” said NIB chief executive Andrew Healy.
“This said, they are slightly down on the previous quarter and we hope to see a downward trajectory moving forward.”
Danske said it expected house prices to continue falling in Ireland for the remainder of the year.
Danske chief executive Peter Straarup said the economy would continue to face challenges and NIB would “continue to be plagued by higher impairment charges” a “couple [of] quarters into 2012”.
He described Danske’s €1.4 billion purchase of NIB and Northern Bank in 2005 as “unfortunate”.
“But there are many fine qualities in this institution and once the Irish calamity has been sweated out, I think the bank will prove itself to do very well,” he said.
Danske said bad-debt charges and actual losses totalled €2.3 billion, or 23 per cent of NIB’s loan book, and that €1.7 billion of this was incurred on property and construction loans – about 46 per cent of that part of the loan book.
NIB said it had written off 55 per cent of its development loans.
The bad-loan charge at NIB, which has €3.3 billion of commercial property loans, accounted for half the overall impairment charge at Danske in the first nine months.
Overall loans reduced by 8 per cent to €9 billion, while deposits increased 18 per cent to €5 billion.
Danske said rents declined and vacancy rates rose in the Irish commercial property market and that the rate of return demanded by investors increased, adversely affecting property values.
NIB reported an operating profit before impairment charges of €32 million – a fall of 11 per cent on the same period last year. Income fell 17 per cent to €103 million due to reduced customer demand and rising bad loans.
Danske said it would cut 2,000 jobs to reduce costs by 10 per cent. NIB has cut 150 jobs, reducing its headcount to 490, which has helped cut costs by 19 per cent to €71 million this year.
Mr Healy said Danske remained “strongly committed to Ireland”.
“We believe the changes we have made to our business create a good platform for growth once market conditions improve.”
