Irish Life and Permanent (IL&P) said arrears in its Irish mortgage book continued to rise in the three months to April, but said there was evidence to indicate they may have peaked.
In an interim management statement this morning, the company said the number of loans more than 90 days in arrears continued to climb, reflecting the growing number of people who were mad unemployed during 2009. However, those under 90 days had levelled off.
Arrears in its UK mortgage book, meanwhile, continued to decline after reaching a peak in the first quarter of 2009.
"The loan losses are crucial, as they help determine the level of capital needed," said Sebastian Orsi, an analyst at Merrion Capital in Dublin, who has a buy rating on the company. "The arrears numbers are encouraging, albeit tentatively."
The company said it may seek to raise money by the end of the year if it decides to split its banking and life insurance units. Chief executive Kevin Murphy said it would need to raise €900 million.
Irish Life this year created a new holding company that would allow it to split, and Mr Murphy said he's "confident" the Irish bank industry will be restructured.
IL&P said its businesses were performing in line with expectations, with the investment management business performing strongly and mixed demand in its life business.
In the first quarter, investment only sales rose 60 per cent compared to the first quarter of 2009. Single premium sales in its life business rose 39 per cent in the first quarter, but recurring premiums fell 30 per cent as reduced salaries and rising unemployment hit corporate pension schemes.
Demand for loans has declined further, the bank said.
Traders said the overall tone of the statement was positive. "Asset quality appears to be improving in the banking business while margins are holding up. The performance of the life business has rebounded from the tough market conditions of last year," NCB analyst Ciaran Callaghan wrote in a note. "We await further details with regard to potential equity raising options in order to re-capitalise bank."
The bank said it had made "significant progress" in its funding programme, completing term debt issuance of €4.8 billion, which represents about 75 per cent of the term re-financing requirement for the year.
IL&P said cutting costs remained a priority, with 10 per cent of the bank branch network closed in the first quarter of the year and staff cut by 140.
Shares in IL&P were trading down 2.6 per cent this afternoon, at €2.48.
Additional reporting: Bloomberg
