BANK OF IRELAND has warned that its operating profits for the 2010 year are likely to be about 40% lower than they were last year – meaning that the bank could be on course for massive losses this year once its impairment charges are taken on board.

In an interim management statement released this morning, the bank said that the fall in its profits would come as a result of lower operating income, the increased cost of the government’s banking guarantees, and the increased competition in seeking customer deposits.

Last year’s operating profit was €1.5bn – meaning the bank would expect that amount to fall to about €900m or €950m for the calendar year.

RTÉ reports that the bank insisted, however, its impairment charges – the amount written off by the bank to cover bad debts – had peaked last year, with the €4.055bn incurred in the nine months to December 2009 likely to be reduced over the coming three years.

The bank would also see a dip in its profits due to the reining back of NAMA’s transfers – which now only extend to loans with a value of €20m, as opposed to an original value of €5m – which now mean that the bank would be retaining €2.1bn in debt originally meant for transfer.

Another €6.35bn of its current loans remain eligible for transfer, it said, with those loans being transferred at an average discount of 42%.

The bank’s CEO, Richie Boucher, told investors on a conference call that the bank had seen €10bn in customer deposits leave its books in September, after its rating was downgraded and while there was uncertainty over whether the Irish government would extend its bank guarantee.

Shares in the bank fell to 37c this morning as a result of the warning – their lowest value in 19 months – with analysts explaining that the outflow of deposits was a major concern to investors. As of 3:40pm this afternoon, however, they had recovered modestly to 42c.