THE POLISH arm of Allied Irish Banks (AIB), which is to be sold off as the bank seeks to bolster its capital base, has reported a 53.6 per cent year-on-year drop in quarterly pretax profit to 161.64 million zloty (€35.14 million).

Bank Zachodni WBK (BZWBK), in which AIB has a 70.5 per cent stake, attributed the decline in profitability in the first three months of 2009 to the “increasingly difficult economic environment”. With loan impairments rising more 2,500 per cent in the quarter to 160.7 million zloty from six million zloty in the same three-month period in 2008, BZWBK said its focus now was on risk mitigation and cost reduction.

“The provisioning level disclosed in the current year has been driven primarily by the deteriorating macroeconomic environment,” BZWBK said. “Slowdown has affected more and more industries in the Polish economy, resulting in the weaker financial performance and lower ability of businesses to meet their liabilities. Higher occurrences of irregular debt repayment have prompted the group to raise additional impairment provisions.”

The results from BZWBK follow a brief assessment in AIB’s interim management statement last Monday, in which the bank said “some deterioration” in its Polish business was encountered, most notably in its property and consumer loans portfolio. AIB said then there was little activity in the property market, but said deposits were broadly stable and continued to exceed loans.

AIB’s stake in BZWBK is likely to come on the market in the coming months in line with the bank’s promise to complement the €3.5 billion it received two days ago from Minister for Finance Brian Lenihan with €1.5 billion it hopes to raise through asset sales and debt-backs. AIB’s 24 per cent interest in US bank MT is also likely to come on the market.