Impairment charges hit NIB

Operating profit at National Irish Bank (NIB) fell 42 per cent and the bank recorded a €661 million loss during what the bank described as "possibly been the worst year in Irish banking history".

The Danish-owned bank also warned that lenders could see a further deterioration in mortgage book arrears in the coming year.

"Our expectation is that we will have some difficult times ahead generally economically," Brendan O'Hora, National Irish Bank's head of business development and communications, said. "We would probably expect some further deterioration."

The bank said operating profit before impairment charges for the 12 months to December 31st 2009 reached €42 million. Income also fell, slipping 13 per cent to €178 million.

NIB said it set aside €704 million for impairment charges, which resulted in a pre-tax loss of €661 million.

The bank has a total loan book of €10.3 billion, of which mortgages represent €3.8 billion. It said loan quality remained "satisfactory". Most of the bank's impairment charges relate to the €3.3 billion in commercial property loans.

The bank cut its underlying costs by 10 per cent during the year, but the provision for restructuring pushed total costs up 2 per cent. The spokesman said costs were likely to continue to fall into 2011.

In December, NIB announced it would cut 150 jobs, almost a quarter of its 634-strong workforce, and closing 25 of the bank's 58 branches. The restructuring plan is expected to begin this year and be completed on "a phased basis" by mid-2011. A spokesman for the bank said the proposals for voluntary severance were now with the union, which has recommended acceptance, and staff members are currently balloting on the proposals.

A positive for NIB was the news that deposits rose 25 per cent over the year.

"Our 2009 results reflect the severe economic recession and what has possibly been the worst year in Irish banking history. Income is down because of reduced business activity levels and higher funding costs. It's clear the property market remains frozen and this has led us to set aside very high impairment charges," said chief executive Andrew Healy.

"We've responded decisively to the harsh realities of operating a bank in Ireland today. In December, we announced a major restructuring of our business to substantially reduce our costs and to reposition the bank in what is going to be a radically changed market."

Net profit at parent company Danske Bank Group was up 65 per cent to €230 million. Its operating profit rose 113 per cent to €4.1 billion, while income was up 38 per cent to €8 billion. The bank set aside €3.5 billion for loan impairment charges.

Mr Healy said Danske Bank had reaffirmed its commitment to Ireland.

Additional reporting - Reuters