Bank of Ireland says plunges into red

Posted 11 6 2009 4:04PM

DUBLIN (AFP) – The Bank of Ireland on Wednesday said it had dived into a loss during its first half owing to mounting bad property debts in "very challenging" economic conditions.

The bank posted a pre-tax loss of 979 million euros (1.444 billion dollars) for the six months to September 30 compared with profit of 647 million euros during the equivalent period in 2008.

Irish banks have been hard hit by a property price collapse in the recession-hit country which plans a bad bank to take toxic assets off the books of financial institutions.

Bank of Ireland said loan impairment charges in the six months were 1.8 billion euros, up from 267 million euros a year ago.

It said the "general economic environment has deteriorated" and the impairment charge "reflects significant deterioration in asset quality in our property and construction portfolio, primarily landbank and development in Ireland".

The bank has forecast loan impairments of 6.9 billion euros in the three years to March 2011.

Group chief executive Richie Boucher said trading conditions in the six months had been "very difficult".

"The level of economic activity across our main markets has contracted and the credit environment deteriorated... There are some indications of a slowdown in the pace of economic decline in the UK and to some extent in Ireland. "Funding conditions across international money markets have improved from the more stressed levels experienced earlier in the year.

"Notwithstanding these trends, the outlook remains challenging," Boucher added.

Laws to set up a National Asset Management Agency (NAMA) are expected to be passed by the lower house of the Irish parliament later this month.

Some 77 billion euros in property loans from the main banks will be transferred to NAMA for an estimated 54 billion euros.

Finance Minister Brian Lenihan said Bank of Ireland would transfer up to 16 billion euros in loans to NAMA.

Boucher said there are "significant uncertainties" on the discount NAMA will pay for the bank's loans.