ILP warns bad loan provision may rise by €100m

SHARES IN Irish Life & Permanent (ILP) fell by just more than 4 per cent in Dublin yesterday after the group said its impairment provision on bad loans would be €80 million to €100 million worse that previously expected.

ILP, which is led by Kevin Murphy, said this was due to the continued weakness of the economy here, which has reduced property valuations.

The provision relates to the company’s banking arm – Permanent TSB – and will be reflected in the company’s 2010 full-year results, which will be be published on March 2nd.

It will take ILP’s total impairment provision on bad loans to more than €400 million.

Stockbroker Davy had previously forecast that Permanent TSB would record a loss for 2010 of €296 million, but this increased provision could see the final figure move up to just below €400 million.

It is understood that ILP considered postponing the publication of its 2010 results until the completion of the Prudential Capital Assessment Review and Prudential Liquidity Assessment Review exercises, which are currently being carried out by the Central Bank and Financial Regulator.

However it decided to proceed with the results announcement and then deal separately with the regulatory reviews.

The review outcomes are not scheduled to be available until the end of March 2011.

ILP noted that since it issued an interim management statement on November 17th, the economic outlook has “deteriorated”, with the Government securing an EU-IMF bailout.

“Consensus expectations are now for a delayed recovery with modest economic growth in 2011,” it said.

“We have accordingly reviewed our end-2010 provisioning assumptions for the peak-to-trough fall in residential property prices and for commercial property valuations.”

Permanent TSB has an Irish loan book of about €27 billion, of which €17 billion is tracker mortgages.

It is the biggest mortgage lender in the country.

Permanent TSB has been in the headlines this month following its decision to cut staff numbers by about 300 and increase its variable mortgage interest rate by one percentage point to 5.19 per cent.

It also withdrew its fixed-rate mortgage offering.

Permanent TSB lost €270 million in 2009.

ILP’s shares closed in Dublin yesterday at 90 cent.