Bad debt sees First Trust post £86m loss
First Trust Bank yesterday became the latest of Northern Ireland’s big four banks to register a heavy loss for 20 09 as provisions for bad debts wiped out profits.
The company, a subsidiary of Allied Irish Banks (AIB), reported a loss of £86m for the year after it was forced to put aside £204m in impairment charges for loans it does not expect to be paid back.
The result is in sharp contrast to the £33m profit the bank made in 2008, a change which it said reflected the sharp deterioration of the Northern Ireland economy last year, particularly in the property sector.
Before the provisions for impaired loans First Trust made an operating profit of £119m, although this was still down 9% on the previous year.
First Trust was not alone in seeing its profits turn to losses as the recession took hold.
Last month Ulster Bank posted a £368m deficit for 2009 after setting aside £649m for bad loans, while Northern Bank made a £100m loss because of £168.7m in impairment charges.
First Trust’s parent company AIB saw its losses hit a massive €2.4bn (£2.2bn) after having to set aside €5.4bn for bad debts.
Around €3.4bn of this related to loans that have been identified for potential transfer to the Republic’s ‘bad bank’ the National Asset Management Agency, which was set up last year to take billions in toxic assets off the balance sheets of Irish banks to allow them to start lending again.
Operating profit before these provisions was €3bn.
“2009 was a very challenging year for AIB. Difficult economic conditions in Ireland and globally and significant asset impairments resulted in a material level of credit losses,” the bank said.
AIB said its Northern Ireland operation First Trust had seen net interest income fall 21% from the year before.
That reflected lower deposit margins driven by increased competition for deposit balances and a very low rate environment, partly mitigated by an improvement in lending margins.
First Trust’s customer deposits were up 3% over the year, driven by the launch of several fixed-term deposit offerings, while customer loans reduced by 5% when compared to December 2008.