ANALYSIS:NATIONAL IRISH Bank has been aggressive – more than most banks – in writing off loans to the commercial property sector.
The amount NIB has set aside to cover loan losses has risen from €68 million to €134 million to €198 million over the last three quarters. Most of these losses are on property loans.
The bank has written off about 10 per cent of its €3.3 billion commercial property and development loan book over the past year, a stance which is more bearish than most other lenders.
Prior to the State’s bad bank plan, commercial property loan losses were expected to hit 8 per cent at AIB and 6 per cent for Bank of Ireland, Goodbody has estimated. “It appears that Danske is taking all the property hits up front,” said Eamonn Hughes, analyst at Goodbody.
The fact that NIB’s owner, Danske, is a foreign lender with a relatively small Irish unit might explain its pessimism. Other Irish institutions are likely to face even larger up-front loan losses under the Nama plan.
NIB has not seen a significant increase in arrears in its €3.2 billion business loans or €4.2 billion mortgage and personal loans. The bank’s Danish owners have painted a grim future for Ireland, saying that it sees no recovery until “deep into 2010”.
The situation is no prettier at Northern Bank, Danske’s Northern Irish subsidiary, which reported a £45 million loss.
The one positive for NIB has been its ability to cut costs. It reduced costs by 13 per cent in the first quarter. Danske said loan losses would be “high” in 2009 and that, in hindsight, the timing of its purchase of NIB in 2005 was “not good”. The bank appears willing to take as much pain from that acquisition as it can now.
