Irish bank AIB plunges to 2.7-billion-euro loss

(DUBLIN) - Ireland's Allied Irish Bank said Tuesday it made a pre-tax loss of 2.66 billion euros (3.60 billion dollars) in 2009, as bad loans soared in what it described as a "very challenging year."

The shortfall compared with a 2008 pre-tax profit of 1.03 billion euros, Ireland's biggest bank said in a results statement.

The bank meanwhile suffered a net loss of 2.41 billion euros in 2009 after a net profit of 772 million the previous year.

"The crisis in the global financial markets and the severe downturn in the economies in which the group operates continued to significantly impact on our businesses throughout 2009 and resulted in a further substantial increase in the provision charge for loans," said AIB in the earnings release.

"Difficult economic conditions in Ireland and globally and significant asset impairments resulted in a material level of credit losses."

The group said it set aside 5.35 billion euros (7.24 billion dollars) for bad loans in 2009. That represented 4.05 percent of its average customer loans and compared with 1.82 billion euros in 2008.

The amount of "criticised" loans -- impaired, doubtful and vulnerable loans which are under watch -- stood at 38.18 billion euros or 29.4 percent of total customer loans at the end of 2009.

That compared with 15.47 billion euros or 11.7 percent of total customer loans in 2008.

The bank has been ravaged by the country's property market meltdown and a deep recession amid the global financial crisis.

It estimated that some 23 billion euros of land and development loans will be transferred to the National Assets Management Agency (NAMA).

NAMA, which was given the go-ahead by the EU last week, is a "bad bank" set up by the government to clear soured loans from the books of the country's banks.

"The outlook and environment remain extremely challenging," AIB said.

"There are very significant matters and initiatives including NAMA, the European Union decision on restructuring and funding costs/market conditions, all of which could materially affect the Group's performance.

"In line with global trends for banks to hold more capital, AIB will be moving to increase its capital ratios. In 2010 AIB will prioritise restructuring."

AIB and the country's second-biggest lender, Bank of Ireland (BoI), have each received a 3.5-billion-euro capital injection from the government.

Last month the government took a 15.7 percent stake in BoI in lieu of a 250-million-euro cash dividend due under terms of the recapitalisation scheme.

Anglo Irish, Ireland's third biggest bank, was nationalised in January 2009 and has received a 4-billion-euro recapitalisation from the government.

NAMA is to buy bank property loans worth up to 90 billion euros which soured in the country's recession. It will use taxpayers' money to buy the loans at a discount for some 54 billion euros.