Bank of Ireland has reported a pre-tax loss of €979m for the six months to the end of September after taking a hit of almost €1.8 billion to cover potential loan losses. The figures are broadly in line with expectations.

The bank said trading conditions in the six months had remained difficult, and while there were signs that the decline in the Irish and UK economies had slowed, the outlook remained tough.

Operating profits before impairment charges fell 18% to €787m. The bank said its customer deposits had risen by 4% since March, but total loans to customers dropped 2% to €131 billion, with the bank blaming reduced demand for credit due to the economic downturn.

Bank of Ireland said in September that the discount on loans it was transferring to NAMA could be 'significantly less' than the overall estimate of 30%. But this morning it said there were significant uncertainties on the final figure as it would be known only when the loans had been valued by NAMA.

It added that a review of its business plan by the EU following the Government's recapitalisation measures was 'at a preliminary stage'.

The bank defended its lending policies, saying it had lent over €1 billion in new mortgages since April and €1.5 billion to small businesses. BoI said it was approving 350 mortgages a week.

It said it expected a total loan loss charge of €6.9 billion in the three-year period to March 2011 - in line with previous estimates - due to the continued poor outlook for the Irish property and mortgage markets.

A breakdown of the results showed that BoI's retail banking business in the Republic lost €655m in the six months, after a €286m profit a year earlier. This business accounted for €900m - around half - of its total loan loss charge.

But Bank of Ireland Life made a €57m profit, up from €3m a year earlier, mainly due to an increase in the value of its investments, but its operating profits were 55% lower as sales fell 40%.

UK losses widened to €228m, also affected by higher impairment charges, while the capital markets division made a loss of €51m. This was affected by an impairment charge of €367m in the corporate banking business.

Bank of Ireland shares closed 24.5% higher at €1.75 in Dublin this evening - up 34 cent.