National Irish Bank has reported a sharp fall in pre-tax profits for the first half of this year.

NIB's pre-tax profits were €2m, compared with €7m in the same period last year, as it felt the effects of the property slump and the general economic downturn.

This was mainly reflected in charges for bad debts, which soared to €25m from €4m in the same period last year. Profits before these charges more than doubled to €27m. Total lending rose 19% - with mortgage lending up 22% - and customer deposits were 8% ahead. NIB said its day-to-day costs were reduced by 12%.

NIB said almost 40% of its loans consisted of 'low risk' residential mortgages, while lending to house builders represented only 9%. Chief executive Andrew Healy said the bank had increased its provisions for bad debts because of the economic downturn and the outlook for continuing challenging conditions, but he said overall its asset quality remained sound.

Danske Bank said NIB's expansion of its branch network was going ahead as planned, with four more due to open this year, though five existing branches will also be merged with larger neighbouring branches.

It said there was increased uncertainty in the Irish market, and falling house prices and construction activity were likely to lead to subdued demand for the bank's products.