Provisions for impaired loans at Irish Life & Permanent in the second half of 2009 will be higher than previously expected, the company said today.
It predicted loan provisions in the second half would be broadly in line with the first half's €189 million, compared with €82 million in the whole of 2008.
In an interim management statement the financial group said the total impairment for the three years to 2011 will be between €800 million and €900 million. Previous estimates had predicted losses of €700 million.
Shares in the company slipped in Dublin trading, falling 12.8 per cent to €3.84 at 10.30am.
A note from Bloxham analysts said most of the new was reflecting the tougher environment, particularly lower than expected margins and the increase in the bad debt provision guidance.
Demand for lending in home mortgages and consumer finance showed continuing weakness, the IL&P statement said, with new advances for the year predicted to be down about 80 per cent on 2008 figures. The group expects Permanent TSB's loan book to decline "modestly" through 2009.
The company said that although mortgage arrears in its Irish residential sector were still rising, the rate of growth had moderated.
"Arrears cases, over 90 days due, increased by 3 per cent in both September and October versus an average monthly increase of 8 per cent to August," the statement said. "The amount of over 30 to 90 days due cases are broadly unchanged from June 2009."
The group blamed the economic conditions for lower new business volumes, tighter margins across its businesses and rising impairments in its loan book.
Although debt market conditions had improved significantly in the second half of the year, the cost of funding was still well above normal levels, it said.
However, the dependence of its banking business on ECB funding has been significantly reduced, it said, falling to €7 billion from €12 billion at the end of June. Retail deposits at Permanent TSB are expected to grow by 20 per cent this year, it said.
In the life business, the group said both retail and corporate divisions of Irish Life Assurance were seeing weaker demand. However, Irish Life Investment Managers (ILIM) continued to perform strongly. Life sales are expected to drop 35 per cent for the year compared with 2008.
Goodbody stockbrokers said it would likely be increasing loss estimates for the company, although IL&P had no operating loss guidance at the interim management stage.