Irish Life & Permanent, the country's biggest mortgage lender and life insurance company, has reported that operating profits at Permanent TSB bank fell by 86% to €30m.
The losses come about because the Permanent TSB was exposed to investments in three Icelandic banks, US investment firm Lehman Brothers and because of an increase in the money set aside to cope with loan losses.
The group's chairman Gillian Bowler apologised for transactions involving Anglo Irish Bank, which led to three directors' resignations, saying they were wrong. Ms Bowler said: 'The board did not know that they were occurring and I apologise unreservedly for them.'
Later, Ms Bowler told reporters it was now a matter of record that, during 2008, the Central Bank and the Financial Regulator encouraged banks to work together. But she added that she fully accepted that neither gave prior approval to the IL&P deposits in Anglo.
Overall, the group reported a 42% fall in operating profits to €341m for last year. Operating profit at the group's life and pensions division fell by 18%. No final dividend is being paid. There was an after-tax loss of €433m due to the effect of collapsing stock markets on its investments.
The bank's chairman Gillian Bowler said the results showed a 'strong performance in a tough market'. Ms Bowler said they reflected the the general economic slowdown in the second half of 2008, but she said the bank remained strong and was not faced with 'the massive impairment charges faced by many other banks'.
She also said the board had asked operations director Kevin Murphy to take responsibility for day to day operations across the group.
Bad loan charges to double in 2009
A breakdown showed that new loans issued by Permanent TSB fell by 43% of just over €7 billion. Excluding the €122m linked to Iceland and Lehman Brothers, the bank set aside €82m for bad loans, up from €28m a year earlier, adding that this figure was likely to double in 2009. It said the 2008 figure included €12m linked to a 'solicitor fraud'.
IL&P says there was a marked increase in arrears in residential mortgages in the last three months of 2008, adding that there was negative equity in 8% of total cases at the end of last year - about 15,000 mortgages.
Retail life sales at Irish Life fell 40%, with the biggest fall coming in lump sum investment products.
On the outlook for 2009, IL&P said it would continue to be profitable, but expected life sales and new lending to continue falling. It warned of a high degree of uncertainty and volatility on financial markets and a further slowdown in the economy.
IL&P also said it had written €170m off the value of TSB Bank, which it bought in 2001.
The group said it had a 'very strong' capital position, but was engaged with the Government in a review of the long-term structure of the banking sector.
IL&P shares closed 19 cent higher at 91 cent in Dublin this evening - up 27%.
