IRISH LIFE & PERMANENT has reported a pre-tax profit of €414m for the first six months of 2011.

Although the figure shows a massive turnaround from last year’s first half loss of €34m, the result is skewed by a recent liability management exercise (LME).

The outcome includes an exceptional gain of €763m from the LME.

Excluding this figure, the financial institution’s loss before tax was €349m. The group suffered from impairment charges of €333m at its banking division, Permanent TSB.

CEO Kevin Murphy said  there were a number of positives in the performance for the six months of the year with Irish Life recording higher sales and Permanent TSB seeing a higher net interest margin.

However, he added:

Both businesses were impacted by the continuing difficulties in the broader economy including rising unemployment levels, reduced disposable income and weak consumer confidence.

Sale of Irish Life

In order to raise capital to reach new Central Bank requirements, the group is to sell its profitable Irish Life insurance business.

Murphy said that there are a number of interested parties and discussions are progressing.

“We are encouraged by the process so far,” he said.

Irish Life Assurance and Irish Life Investment Managers Limited grew its sales by 6 per cent in the six-month period.

Troubles at Permanent TSB

Taking away the positive impact of the bank’s LME and other exceptional items, Permanent TSB would have recorded an operating loss of €364m in the first six months of 2011.

Impairment charges on bad loans increased from €183m in H1 2010 to €333m in H1 2011.

Murphy said this figure was not unexpected and was “in line” with guidance given after the bank’s stress test in March.

About 8.8 per cent of the bank’s mortgages are in arrears of more than 90 days.

Murphy explained that falling house prices have also had a negative impact on the loan losses figure.

“As house prices fall, the impairment cost for the bank increases and that has clearly influenced our figures in this period,” he said.

Funding

Permanent TSB announced that it just completed a deal to raise £1.4bn in unguaranteed funding through the UK. The money will be secured against the bank’s UK loan book.

In the first half of 2011, the bank incurred €94m in guaranteed funding costs, a jump of €49m on last year’s figure.