Danske Bank has announced plans to set up a new arm to wind down its commercial and investment property loan portfolios at National Irish Bank (NIB).
As part of the arrangement, NIB and Northern Bank will be rebranded as Danske Bank by the end of this year.
The announcement comes as National Irish Bank announced pretax profits of €213 million, up 6 per cent on the same three-month period a year earlier. Operating profit was 3 per cent higher at €11 million.
Loan impairment charges amounted to €527 million compared to €381 million for the first quarter of 2011.
The bank said it set aside €195 million for loan impairment charges for the first three months of the year.
"The Irish economy is expected to continue to face structural challenges, and because of the economic climate, the level of future impairment charges is uncertain," the bank said. "The situation for rental property and property developers in Northern Ireland is also uncertain. Loan impairment charges at the units in Ireland and Northern Ireland are therefore likely to remain high, at least in the coming quarters."
Shares in Danske Bank jumped 5 per cent following this morning's announcement.
Following the planned restructuring, Andrew Healy is to resign as chief executive of NIB and as a member of Danske Bank group's executive committee.
"We want to focus on our core business in Ireland," said Eivind Kolding, chairman of the executive board of Danske Bank. "Danske Bank has considered alternative options and decided that this solution is the best in terms of creating value. With these initiatives, we also confirm our commitment to Ireland."
Danske Bank said first-quarter net income rose 10 per cent after Denmark's largest lender booked higher income from lending and lower costs. Profit rose to 783 million kroner (€105 million), compared with 709 million kroner (€95 million) a year earlier, the bank said.
Commenting on NIB's performance during the first quarter, Mr Healy said the bank's performance was in line with expectations.
"Further falls in residential and commercial property prices have kept impairment levels high although they are lower than in the previous quarter," he said. "Underlying costs are now down 30 per cent over the two year period since the start of our restructuring programme."
