National Irish Bank (NIB) has reported a pre-tax loss of €552 million for 2008 due to loan impairments of €228 million and a once-off goodwill write-off of €395 million.
The write-off follows a revised assessment by NIB’s parent Danske Bank of the deteriorating outlook for the Irish economy and for the business opportunities for NIB and is equivalent to the amount of goodwill paid by Danske when it bought NIB in 2005.
Andrew Healy, National Irish Bank chief executive, said the pre-tax loss figure was stark.
“The bulk of that figure, however, is made up of a one-off goodwill write-off of almost €400m and by our realistic view of likely bad debt losses in this, the worst economic recession in our lifetime.” The write-off is the entire
"Given the recession, we’ve taken a severe and negative view of the likely bad debt in this sector," he said. The €228 million set aside for bad loans compares with €16 million in 2007.
Peter Straarup, chief executive Danske Bank, explained the write-off by saying NIB’s performance stopped matching expectations last autumn.
No one “anticipated the speed and depth of the recession that has hit Ireland and the assumptions we made in 2005 on likely economic growth are clearly no longer valid,” Mr Straarup said.
“It is therefore appropriate for us to now write off outstanding goodwill in full. This does not alter our commitment to Ireland and National Irish Bank”.
Income at NIB increased by 13 per cent to €204 million while costs fell by 12 per cent to €133 million.
Mr Healy said National Irish Bank remained well capitalised, with guaranteed deposits and was part of the Danske Group.
NIBincreased its loan book by 14 per cent to €10.65 billion. NIB said it had approximately €3.5 billion in commercial property loans and said this was the source of 75 per cent of its loan loss impairments. Mr Healy said NIB was working with its customers to minimise potential losses.
NIB's loan loss impairments represent 2.14 per cent of overall loans compared to an average of 0.57 per cent for the Danske group.
Over the last year business loans increased by 13 per cent, compared with 34 per cent in 2007, while customer deposits increased by 2 per cent to €3.2 billion.
While mortgage activity was strong at the beginning of 2008 this declined in the second half of the year while a combination of stricter criteria and falling demand contributed to the drop in business loans.
The bank's cost-to-income ratio fell to 65 per cent from 84 per cent last year.
NIB said its residential mortgage lending book remains in good shape with an average loan to value ratio on mortgages “in the mid fifties”, despite the decline in house prices.
NIB has 61 branches with 645 employees.
