Irish Life & Permanent said that impairment provisions in its banking business would be higher this year than previously forecast as commercial property values continued to fall. Its share price slumped 13.5% on the news.
In an interim management statement today, IL&P said that bad debt provisions in the second half would be broadly in line with the first half provisions of €189m. This compares with €82m for the whole of 2008.
It said it would raise the estimated total provisions for the three years to 2011 to between €800m and €900m from €700m.
Irish Life and Permanent said that arrears in its Irish residential mortgage book continues to rise but that the rate of growth has moderated. The lender said that arrears cases over 90 days increased by 3% in both September and October compared to an average monthly increase of 8% to August.
Permanent TSB said that after a very difficult start to the year, liquidity conditions have generally improved over recent months. It said that dependence on money from the ECB has been greatly reduced and currently amounts to €7 billion, down from €12 billion from the end of June.
Lending continues to be weak in Permanent TSB's main areas - home mortgages and consumer finance. Advances for the full year will be about 80% lower than in 2008, it adds. 'Overall, the bank's loan book is expected to decline modestly through 2009,' it added.
However, retail deposits are expected to grow by about 20% for the year, while strong growth is also being recorded in Irish corporate deposits after the general outflow from the country of overseas funds.
Life assurance sales down 35% on 2008 levels
Today's trading update said that overall life assurance sales are expected to be about 35% lower on 2008 levels. IL&P said that retail investors remain cautious with a low appetite for investment products, while reduced profitability in small and medium sized businesses have contributed to lower pension volumes.
The bancassurer said that while pension funds have benefited from stronger equity markets so far this year, this has been offset by the steep falls in property funds.
IL&P said it expects that 2009 will see the worst of the current economic downturn in Ireland with GDP expected to fall by 7-8%.
It said the economic environment has affected the group with lower new business volumes and tighter margins across all businesses and, as expected in the banking business, rising impairments in its loan book.
Irish Life and Permanent, which said it remained well capitalised, added it had made good progress towards restructuring the group, which analysts expect will lead to a spin-off of Permanent TSB. It will hold an EGM on December 17 to approve the setting up of a holding company that will pave the way for the overhaul, then list the new company's shares in mid-January.
Shares in Irish Life and Permanent were down 59 cent to €3.82 in Dublin this afternoon, down 13.5%.
