Irish Life & Permanent today reported a loss before tax of €310m in 2009 compared with a profit of €63m in 2008. 22% of mortgage accounts were in “negative equity”; 7,228 mortgage accounts in arrears for over 90 days.
The 2009 loss was driven by an operating loss at Permanent tsb bank of €270m while the life company recorded profits of €102m in weaker market. The group predicts improved performance in 2010 and return to profitability in 2011.
The bank loss was after making substantial provisions [€376m] for impaired loans in the mortgage and consumer finance divisions in Ireland and the UK. Before making provisions, Permanent tsb bank recorded €106m in profits. IL&P's life & pensions businesses [Irish Life, Irish Life Investment Managers] recorded a profit of €102m (2008: €284m) which reflected the weaker market generally for life & pensions businesses.
CEO Kevin Murphy described 2009 as a “difficult year” but said he was confident that the performance in 2010 would improve on the back of increased profitability in the life & pensions business - - flowing from actions taken in 2009.
Murphy said that the goup has focussed on reconfiguring the businesses for this new market and had progressed major cost reduction programmes in both the bank and the life company as well as good progress on customer retention in the life business and strong growth in customer deposits in the bank [an increase of €1.8bn in the year].
There was a reduction in loan-to-deposit ratio (LDR) to 246% - - still a very high figure. (2008: 271%)
IL&P aims to have 70% of funding comprising retail deposits and long-term debt by 2012. Corporate Deposits fell -€0.8bn (-12%) and there was an outflow of overseas corporate deposits in Q1.
In respect of arrears in the bank’s Irish mortgage book, Murphy said the bank was working closely with customers in financial difficulty to agree realistic repayment schedules. He said that at the end of 2009, 3.9% [7,228 mortgage accounts] of mortgages were in arrears for more than 90 days. An estimated 22% of mortgage accounts were in “negative equity”.
Murphy said: “The problem of arrears is a real and painful one for customers and we are working closely with customers to agree realistic repayment terms for those in financial stress. Where customers talk to us we invariably can agree workable solutions with them.”
Results detail
Goodbody analyst, Eamonn Hughes, commented: FY09 First Glance – Life margins and volumes better than anticipated - -"IL&P has reported an Operating Pre-tax Loss for FY09 of €196m compared to our -€167.9m estimate. Operating EPS was -66 cent compared to our -62.7 cent forecast. NAV/share at c€8.9 (provisionally estimated) compared with our €8.9 forecast (pre goodwill). There were €106m of negative variances (net) below the line, compared with our anticipated -€140m.
Life Division: Life Operating Pretax Earnings of €102m compared to our anticipated €103.4m. The Profit from the Existing Business & Investment Return combined was €51m vs our €61m forecast. More importantly, new business profit was down 49% to €51m vs our 58% lower estimate at €42.4m. Core new life business sales were down 32% (-36% anticipated), with Retail down 36% (-40% anticipated) and Corporate down 30% (-33% forecast). ILIM sales were back 6% (-15% anticipated). The core new life business margin was 11.5% (we had estimated 9.5%) and was 5.8% for ILIM (vs our 6.6% estimate). Below the line, short-term investment variances had a negative €68m impact on Reported Life PTP (-€105m pretax impact anticipated) and there was an economic assumption change impact of -€38m (-€35m anticipated). Solvency cover was 1.6x compared to 1.6x at end 2008. Profits in the non-life Associate of -€2m compared to our +€10m estimate.
Banking Division: The Bank reported an Operating Pretax Loss of €270m compared to our -€271m estimate. Net interest income was €375m, -21% yoy (vs -22% estimate to €368m), with the loan book -4% (-3% yoy estimate). The net interest margin was 83bps, which compared to our 82bps forecast. Gross new lending overall at €1.2bn (€1.5bn estimated). Deposits were essentially flat (vs -5% anticipated). Non interest income was €18m (forecast was €44m). Costs were €287m (€285m estimate). The bad debt charge at €376m compared with our €398m estimate. Non performing loans were €1,855m (5.9% of loan book), up from €1,802m in June (4.5% of loan book) and €1,096m in December 2008 (2.8%), while Impaired loans were €753m (2.4% of loans) from €442m in June (1.1% of loans) and €202m (0.5%) in December 2008. At period end, 60% of bank funding was deposits and long term debt, from 59% in June and 62% last December. ECB drawings were €9.8bn, from €12bn in June and €11.8bn last December (29% of loans). The Loan to Deposit ratio was 246%, compared with 309% in June and 284% in December 2008 and, finally, the Risk Asset Ratio was 9.2%, from 9.3% in June and 9.2% in December 2008.
In terms of outlook, the company indicates that it expects a similar outturn in the bank, but a significant improvement in the life business. Our banking figures for FY10 look vulnerable, but the main focus is likely to be on the life company. On first glance, these FY09 results look in line on both the bank and the life company. However, new business margins and volumes on the life company are better than anticipated."
