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News : Irish Last Updated: Aug 31, 2011 - 1:53 PM

Irish Life & Permanent reports pre-tax loss of €349m in H1 2011
By Finfacts Team
Aug 31, 2011 - 9:07 AM

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Irish Life & Permanent today reported a pre-tax loss of €349m for the first half of this year (H1 2011), mainly related to loan losses at its Permanent TSB banking business.

IL&P is under State control after it was provided with capital after the March bank stress results. Irish Life, the life business, is to be sold.

Speaking today, Kevin Murphy, group chief executive, said;  “there were a number of positives in the performances of  both the bank and the life company during the period including higher sales in the life business and a higher net interest margin in the bank.  However both businesses were impacted by the continuing difficulties in the broader economy including rising unemployment levels, reduced disposable income and weak consumer confidence.”

Murphy said IL&P was making good progress on the planned sale of Irish Life.  He said; “we are progressing discussions with a number of interested parties and we are encouraged by the process so far.”

The bank recorded a pre-tax operating profit for the period of €376m (2010 – loss of €131m).  However the key factor in this result was the gain of €763m as a result of the State's recapitalsisation.  Excluding that gain, and the net loss of €23m on the bank’s own Tier 2 debt holdings, the bank recorded an operating loss of €364m in the first six months of the year.

While the bank increased its net interest margin to 97 basis points from 86 basis points in 2010, the main factor giving rise to the loss was the impairment charge of €333m for the period, an increase of €183m over the charge for H1 2010.

Speaking on the increased bad debt provisions (H1 2011 - €333m compared to   H1 2010 - €150m), Kevin Murphy said that the figure was in line with guidance given at the conclusion of the PCAR / PLAR stress test exercises in March; “The figure reflects an increase in the number of arrears on the one hand (8.8% of the bank’s mortgages are in arrears of more than 90 days) and a further reduction in house prices on the other.  As house prices fall, the impairment cost for the bank increases and that has clearly influenced our figures in this period.”

In relation to the rising cost of the bank guarantee, the figures show that Permanent tsb bank incurred €94m of guaranteed funding costs in the period compared to €45m the previous year.  This reflects both the higher charge the guarantee in the period and the increased amount of the bank’s funding which was subject to the guarantee.

Murphy announced that Permanent tsb has just completed a deal to raise £1.4 bln in unguaranteed funding through the UK.  The funds raised will be secured against the bank’s UK loan book.

It has also been confirmed that the bank has submitted a restructuring plan to the European Commission which sets out "a strong business case for the bank and commits the business to have a net interest margin of over 1%, normalised impairment provisions, a strong capital position and a loan to deposit ratio of 122.5% by 2015."

IL&P said sales at its life and fund management business rose 4% to €286m in the period, but the impact of the pension levy and tough conditions in the financial markets and economy led to the €4m loss. IL&P has paid €100m linked to the levy to Revenue.

Permanent tsb had funding from the  ECB and Irish Central Bank of €14.7bn at the end of June.

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