Lloyds Banking Group said it remains "cautious" on its Irish loan portfolio due to the outlook for the economy.
Impairment losses on Irish loans jumped to £2.9 billion in 2009 from £526 million the previous year. The losses equal about 9.9 per cent of gross loans in Ireland, up from 3.4 per cent at the end of June.
While the London-based bank forecasts a decline in total impairments this year and next, it "remains cautious on the Irish portfolios", it said in a statement today.
"We continue to have ongoing concerns with regard to the outlook for the Irish economy although we expect 2009 to have been the peak for the International impairment charge," it said.
Lloyds earlier this month announced plans to cut 750 jobs in Ireland as it closes its retail unit Halifax here. The bank took the decision after a review found that Halifax was too small to survive as a result of the financial crisis and the recession
The bank has opened up the personal loan, credit card and deposit books at Halifax to interested buyers as it seeks to offload parts of the business before its planned closure in June.
Prospective buyers have been provided with details of close to €1 billion in fixed-term and demand deposits, and balances in more than 50,000 current accounts at Halifax.
The majority of the €10 billion loan book at Halifax, which consists mostly of home loans and residential investment mortgages, will be held to maturity by the bank, though Bank of Scotland Ireland remains open to the possibility of selling or outsourcing the management of some of its retail mortgage book.
Overall, Lloyds shrank its losses in 2009, despite a £24 billion hit from loans that soured, mostly assets inherited from rival HBOS, which it bought last year.
The bank was one of the first to call a peak in bad debts during 2009 and it says it sees further improvements this year, with impairments continuing to reduce at the rate it saw between the first and second half of 2009, when they fell 21 per cent.
That trend would imply bad debts will drop to about £15 billion this year, despite the ongoing uncertainty over Ireland which helped hold back shares in early trade.
The group, also Britain's largest mortgage lender, said it saw signs of stabilisation for the broader UK economy and a slow recovery in 2010, with house prices expected to be broadly flat and its own, closely watched, retail banking margins improving in 2010 and beyond.
Lloyds, 41 per cent state-owned after it was bailed out by the UK government, posted a loss of £6.3 billion, hit by the 60 per cent increase in impairments. That compares to a £6.7 billion loss in 2008 and a consensus loss estimate of £7.1 billion.
Lloyds said it expects margins to improve this year, with a target of 2 per cent this year as pricing increases begin to feed through. Margins stood at 1.8 per cent in the second half of 2009, an improvement on 1.7 per cent in the first six months.
Additional reporting - Agencies