DUBLIN, Aug 5 – Ireland\’s biggest lender Allied Irish Bank said on Wednesday that it plunged into losses in the first half because of soaring bad debts in a "very challenging period" of "unprecedented" economic conditions.
The bank, which has been ravaged by the Irish property market meltdown and a deep recession, posted a pre-tax loss of 872 million euros (1.257 billion dollars) for the six months to the end of June.
That compared with a profit of 1.04 billion euros in the same period of last year.
Provisions for impaired loans surged to 2.373 billion euros, up from just 137 million euros one year earlier.
"The economic environment and conditions across our markets worsened and we experienced deterioration in our lending portfolios particularly in our property portfolios in Ireland and the United Kingdom," the bank said.
Irish banks have been badly hit by the international financial turmoil and the collapse of a domestic property bubble.
Allied Irish Bank added that the outlook for the rest of the year remained "extremely difficult".
"The Irish economy, together with other economies in which we operate, is in a very challenging phase with continuing uncertainty as to the depth of the slowdown in the global economy, uncertainty in relation to interest and currency exchange rates, unemployment and the direction of property markets."
It said there were increasing signs from leading indicators that the global economic downturn is bottoming out, but any recovery is expected to be slow.
A prolonged economic downturn or long recovery period and dislocation of global credit markets could further reduce the recoverability and value of AIB\’s assets and require an increase in the provision for impairment losses.
Anglo Irish, Ireland\’s third biggest bank, was nationalised in January and has received a 3-billion-euro recapitalisation from the government.
AIB and the second biggest lender, Bank of Ireland, have each received a 3.5-billion-euro capital injection from the government.