Belfast Telegraph

First Trust bank losses spark Northern Ireland mortgage hike fears

Thousands of First Trust customers across Northern Ireland today faced a possible hike in mortgage rates after the bank reported a massive loss of £52m.

Fears were raised that homeowners will be now hit with a rise in monthly repayments as a way for the bank to claw back the cash after the figure was revealed in this morning’s half-yearly results report.

First Trust , which is Northern Ireland’s third biggest bank, had reported a loss of £41m in the same period last year.

The announcement comes after Allied Irish Banks (AIB), First Trust’s parent company, reported a loss of €2bn for the first six months of 2010 — its worst-ever half-yearly results for one of Ireland’s biggest banks.

According to the figures released this morning, First Trust’s £24m operating profit was cancelled out by £76m which had been earmarked to cover bad loans.

The bank also said there was a rise in cases in non-performing loans in Northern Ireland in the second half of 2009.

Following the announcement, a spokeswoman for the AIB told the Belfast Telegraph that it “could not rule out” a rise in mortgage rates for First Trust customers in the province.

She also would not comment on possible job losses and described a recent media report of up to 2,000 jobs in AIB being under threat as “speculative”.

First Trust has not yet transferred any loans to the National Assets Management Agency (Nama), the Republic's so-called ‘bad bank'.

Nama is buying property development loans from the Dublin-owned banks in an effort to improve their balance sheets.

AIB’s managing director Colm Doherty said today that the bank would “reluctantly” have to follow other banks in raising mortgage rates, as it was currently losing money on mortgages.

In April, AIB announced that it was selling its UK division, which includes the First Trust in Northern Ireland, in a bid to satisfy a requirement by the Republic’s Financial Regulator to raise €7.4bn if it is to avoid full nationalisation.

However, it has not yet reported any progress in finding a buyer.

It is understood, however, higher borrowing costs remain an issue.

Mr Doherty said AIB would be a smaller bank after it sold off assets and it would have to address its cost structure.

He would not, however, comment on what form the re-organisation would take.

Mr Doherty told RTE radio that the AIB had given the green light to around 23,000 loans to small business in the first six months of the year.

But he said that demand from small businesses for lending had dropped.

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