National Irish Bank (NIB) has reported a first-half loss of €341 million compared with a profit a year earlier and announced it will not transfer any loans to the National Asset Management Agency (Nama).
NIB is a unit of Denmark's Danske Bank A/S and today reported a 15-fold increase in bad loan provisions.
The bank, which is outside the Government's guarantee scheme, has set aside €379 million for loan impairment charges for the six month period ending June 30th, up from €25 million for the same period in 2008.
The bank said operating profit before impairment charges rose by 34 per cent to €38 million.
It said income grew 6 per cent to €101 million and that costs had been reduced by 6 per cent to €63 million, mainly due to the non-payment of bonuses and the removal of temporary staff.
National Irish Bank chief executive Andrew Healy, said: "Operating profit levels are holding up well but the amount we've set aside for potential loan losses is high.
"Although the level has reduced on the previous quarter, we expect this figure to remain high, in the short term at least."
Mr Healy also said because the bank was part of a strong, well capitalised European banking group it has no reason to participate in Nama.
"National Irish Bank is fully committed to Ireland and we are here for the long term. While we won't directly participate in Nama, we will of course work with Nama where we have mutual clients, taking into account our specific commercial interests.
"We support the objectives of Nama - properly executed, Nama will have a vital role to play in the Irish property market and in the recovery of the banking sector and our economy".
NIB had a loan book of €10.6 billion at the end of the first half, a growth of 5 per cent on the same period in 2008 due to new lending to businesses and mortgages.
Mortgages account for €3.9 billion of the loan book with the lender saying loan quality in this area remains satisfactory. Fewer than 100 customers are in arrears of over 90 days.
The bank has €3.3 billion in loans to commercial property the sector that accounts for most of its impairment charges.
Danske Northern Ireland-based subsidiary Northern Bank has reported an impairment charge of £104 million of which £3.1 million is actual losses.
It said total income was down 9 per cent over the first six months to £100 million and its operating profit, before impairment charges and an financial services compensation scheme levy, was £35 million.
Lending by Northern Bank, excluding public sector, grew by 4 per cent, including a 15 per cent growth in mortgages. Deposits remained stable.
Danske reported a steeper-than-forecast drop in second-quarter pretax profit and said write-offs on bad loans would remain high throughout 2009.
Pretax profit at the Nordic region's second-biggest lender fell to 37 million Danish crowns (€5 million) in April to June, from 4.36 billion crowns a year ago.
"The difficult economic conditions made extraordinarily high loan impairment charges necessary," Danske Bank said.
Loan write-offs rose to 6.55 billion crowns in the second quarter from 572 million in the year-ago quarter, exceeding analysts' average forecast of 6 billion crowns.
Danske Bank said: "The level of loan impairment charges is expected to remain high, reflecting the general economic climate."
The bank's forecast for Denmark's gross domestic product this year has worsened to a slump of 3.5 per cent from a 2.4 per cent contraction projected in its first-quarter earnings report in May.
Additional reporting Reuters
