First Trust today reported a loss of £86m for 2009 as it became the latest of Northern Ireland’s big four banks to be be hit by bad loans.
The company, a subsidiary of Allied Irish Banks (AIB), was forced to put aside £204m in impairment charges for debts it does not expect to be paid back.
The result contrasts sharply with the £33m profit the bank made in 2008, 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.
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.
It said other that income fell significantly compared to the previous year reflecting reduced economic activity on transaction income and costs associated with the Irish Government deposit guarantee scheme, partly offset by a gain on the sale of debt securities.
Costs were 36% lower compared with 2008.