Bank of Ireland (BoI) has today reported a pre-tax loss of €979 million for the six months ending September 30th compared to a profit of €647 million last year.
The bank made an operating profit of €787 million before impairment charges on financial assets in the six months to the end of September.
Bank of Ireland said impairment charges over that period were €1.8 billion, reflecting "significant deterioration" in asset quality in its property and construction portfolio. That figure rose from €267 million amid a halving in property prices halved and doubling of unemployment.
Ireland's biggest lender by market value said net income in the six months through September fell 73 per cent to €162 million from the year-earlier period as bad debts surged.
BoI, which is selling €16 billion of loans to the Government's National Asset Management Agency (Nama), said "significant uncertainties" remain on the discount the agency will pay for the loans.
The bank said it may have to ask the Government to inject more capital. "While the group's strong preference would be to raise capital from private sources . . . ultimately it may be required to seek capital from the Irish government.
"The risk appetite among the international funding markets for Ireland and Irish financial institutions, including Bank of Ireland, could be adversely affected by any uncertainties that could arise if Nama was not to proceed as expected," the lender added.
The bank said its participation in Nama will require the approval of 75 per cent of investors at a special shareholders’ meeting. A date for that meeting has not been set.
The bank stuck with a forecast for loan losses of €6.9 billion in the three years through March 2011.
"The level of economic activity across our main markets has contracted and the credit environment deteriorated," chief executive Richie Boucher said in a statement. "Economic conditions in Ireland were particularly challenging."
However, BoI said there were early indications of a slow-down in the pace of economic decline "to some extent" in Ireland.
"As we face further uncertainties and challenge in the months ahead we will remain focused on our priorities and the clear goals which we have for continuing to make progress on each of these," Mr Boucher said.
The bank's loan-to-deposit ratio fell to 152 per cent from 159 per cent a year ago.
"The impairment charge is at the higher end of what they guided in September," said Oliver Gilvarry, head of research at Dolmen Securities in Dublin. "But it's good to see that the loan to deposit ratio has fallen."
On the Iseq this morning, BoI was up over 13 per cent, AIB was up some 14 per cent, and Irish Life & Permanent rose more than 7 per cent.
Davy Research noted this morning that BoI's loss of €979 million is better than the analyst's €1,075 million estimate, and that operating profits of €787 million beat Davy's €750 million estimate while impairment losses of €1.8 billion came in below the €1.85 billion forecast.
Davy said there were no surprises in the results and that the recent share price weakness was "overdone".
Irish banks suffered another day of sell-offs on the market yesterday, finishing well down at close of business.
Traders speculated that aggressive selling of Irish financials could be down to international fund managers looking elsewhere to generate money, a reaction to speculation that Irish banks may not be able to opt for rights issues until the New Year.
Additional reporting Bloomberg