Irish Life & Permanent losses widen

City A.M. Reporter
Irish Life & Permanent's banking arm reported a wider full-year loss due to soaring impairment charges ahead of a split from the group's life division and a government decision on whether it can remain as a standalone lender.

Once lauded as the only Irish lender to avoid a state bailout due to its lack of exposure to commercial property developers, IL&P was effectively nationalised last year due to its high proportion of costly tracker residential mortgages and inability to access traditional wholesale funding.

Its loss, including a gain of 1 billion euros (£833m) on imposing losses on junior bondholders, was 424 million euros compared with one of 321 million euros a year ago after impairments more than trebled to 1.4 billion euros.

The bancassurer had flagged the higher impairments figure in February, saying it was almost completely driven by its Irish residential mortgage loan book and triggered by a change in the assumption of house prices falls from peak to trough to 55 percent from 43 percent.

The government completed the recapitalisation of the group last week after it sought a court order directing IL&P to sell the life business to the state for 1.3 billion euros.

The government had hoped to help fill a 4 billion euro capital hole by flogging the cash-rich life and pensions business, whose operating profit fell to 96 million euros from 212 million, but postponed the sale due to difficult market conditions.

Dublin is poised to make a decision on the future of the group's banking arm, permanent tsb, by the end of April and finance minister Michael Noonan indicated in January that winding it down was not on the cards, with its sale or merger with a larger bank a more likely option.

The group's chairman insisted the bank had a future on a standalone basis and could provide important competition to a shrunk sector dominated by Bank of Ireland (BKIR.I) and Allied Irish Banks (ALBK.I).

"The significant recapitalisation of the group's banking business will provide it with the foundation from which to build a successful and profitable alternative to the (country's) two main pillar banks," Alan Cook said in its annual report.