Bad debt has left the Northern Bank facing potential losses of £75 million for the first half of this year, it was announced today.
While the bank made an operating profit of £35 million in the period, it had to set aside £104 million to cover itself for loans that may not be paid back. Actual losses from bad debt were £3 million for the six months.
The bank, like all financial institutions in the UK, also had to make a contribution to the Financial Services Compensation Scheme (FSCS). The Northern Bank paid £6 million to the FSCS.
Chief executive of Northern Bank Gerry Mallon said he was confident the bad debt could be absorbed.
"The ongoing difficulties in the property sector are reflected in our continued policy of making prudent provision for potential bad debt," he said.
"However, as Northern Bank remains strong and well capitalised we can comfortably absorb these provisions within our capital base - and actual losses remain at low levels."
The Northern Bank is owned by the Danish Danske Bank Group.
The total income was £100 million, down by 9% on 2008. Lower interest rates and reduced activity in the market were given as reasons for the drop.
Total lending, excluding public sector, grew by 4%, including a 15% growth in mortgages.
Mr Mallon said the bank's performance was stable.
"These results represent a stable half year performance given the challenging global and local market conditions which we and our customers still face .
"We increased our total lending by 4% year on year, which represents an additional £200 million commitment to the Northern Ireland economy.
"A continued focus on efficiencies has resulted in a further reduction in costs.
He added: "Throughout the economic slowdown and turmoil in the financial markets we have remained as committed as ever to supporting and staying close to our personal, business and agri customers alike.
"Northern Bank celebrates its 200 year anniversary this year. Throughout our long history we have consistently applied sound and secure banking practices through good and bad economic conditions.
"Sound banking decisions, keeping close to our customers and continued innovation in our products and services are enabling us to navigate through these challenging times as well."