NIB writes off further €165m of its €10bn loan book

THE DANISH owner of National Irish Bank (NIB) has said that it is too early to say whether losses on loans had peaked as the Irish bank wrote off a further €165 million of its €10 billion loan book.

NIB posted a loss of €155 million for the third quarter of the year after the bad debt charge.

Danske Bank said that it could not conclude that loan losses in its operations in Ireland and the Baltics have reached a peak as the bank’s profit in the third quarter fell almost 50 per cent on higher bad debts in those two countries.

“Banks normally lose money when coming out of the cycle, not during it, so we are still cautious,” said Danske’s chief financial officer Tonny Thierry Andersen. “We have seen the peak of loan losses for the group, but Ireland is an issue and the Baltics . . . It’s too early to say you’ve seen the worst in some countries.”

NIB chief executive Andrew Healy said in the statement that the results were “in line with expectations against the background of extremely difficult economic and market conditions”. He said operating profit increased by 6 per cent “reflecting strong cost management” but that loan impairments “continue at high levels”.

“There are signs of economic recovery internationally but Ireland is still in deep recession and has some way to go before turning the corner,” said Mr Healy.

Danske has not had to inject capital into NIB as the Irish bank operates as a branch rather than a subsidiary. The bank has written off €772 million over the past 18 months primarily on loans due on land and development projects, and commercial properties.

This amounts to a cumulative charge of about 7.4 per cent of the loan book. The bad debt charge on NIB’s €1.4 billion land and development loans amounts to more than 30 per cent of this segment of the book. The bank has €2.4 billion in investment property loans.

NIB has set aside €544 million to cover loan losses over the first nine months of the year. Operating profit increased 6 per cent to €48 million over that period, while income fell 4 per cent to €139 million. Costs declined 8 per cent to €91 million.