AIB, Bank of Ireland and Permanent TSB will likely report a combined €2 billion in soured loan provisions and €1 billionn in losses this year.
All three banks are preparing to report the first effects of the Covid-19 fallout on their loan books, as their report half-year earnings will be published at the start of August, but stockbrokers Davy say the outlook will be better than previously expected as the country went into lockdown.
The figures will allow bank chiefs to comment on how quickly they expect the Irish economy to recover from the severe and sudden economic slump.
Financial analyst Stephen Lyons at Davy said that the bank chiefs may likely decide to set aside large amounts of loan-loss provisions this year to take account of Covid-19 and the rebound in their financial health may be sharper next year than thought a few months ago.
The Government’s credit-guarantee scheme could play a part in the recovery of the banks and for the economy as a whole, if the scheme’s interest rates and terms are attractive to both borrowers and lenders, Mr Lyons said.
Many economists and business groups have urged the Government to hugely expand its €2 billion credit-guarantee scheme to meet the needs of small businesses with zero-interest rate loans, which has proven successful in the UK.
Meanwhile, DBRS Morningstar forecasts Irish GDP will fall 5.5% and unemployment will average 9.5% this year under its “moderate scenario” for the virus.
However, GDP slides 9% and unemployment averages 14% under an “adverse scenario” which assumes some localised outbreaks in parts of the world early next year.
“Although Europe appears to be in a relatively good place with regard to disease containment, we have revised 2020 growth further downward for a few of the countries hardest hit by the initial wave of cases, namely Italy, Spain, France, and the UK,” Morningstar said.