(RTTNews) -  Bank of Ireland (IRE: News ,BKIR.L: News ) Wednesday reported a sharp decline in profit for the first six-month period, hurt by lower net interest income in a difficult low interest rate environment. Further, the company said that there are some indications of a slow-down in the pace of economic decline in the UK and to some extent in Ireland, and the outlook remains challenging.

Profit attributable to stockholders plunged to EUR 168 million from EUR 628 million in the prior year. Diluted earnings were 1.9 cents per unit of EUR 0.64 ordinary stock, compared with 63.2 cents per unit of EUR 0.64 ordinary stock.

The company noted that prior-year results were restated for the impact of the amendment to IFRS 2 share-based payments which has increased the operating expenses by EUR 3 million last year.

Profit before tax for the period was EUR 80 million, down 89% from EUR 703 million in the previous year. Underlying pre-tax loss for the period was EUR 979 million, compared with a profit of EUR 647 million in the previous year. Underlying pre-tax loss exclude the impact of non-core items, primarily the gain on the repurchase of non core tier 1 debt securities.

The Dublin, Ireland-based company's net interest income declined 24% to EUR 1.48 billion from EUR 1.95 billion in the same period a year ago. Net other income dropped to EUR 253 million from EUR 54 million in a year earlier.

Net interest margin declined by 10 basis points to 1.61% from 1.71% in the first half last year, hurt primarily by margin attrition on deposits as a result of the low interest rate environment together with intense competition for deposits.
Retail Republic of Ireland recorded net interest income of EUR 596 million, down from EUR 737 million in the previous year. Net interest income from Capital markets declined significantly to EUR 493 million from EUR 841 million in the comparable period. Net interest income from UK Financial Services dropped to GBP 298 million from GBP 308 million in the year-earlier period.

During the period, the company recorded an impairment charge on loans and advances of EUR 1.79 billion, much higher than EUR 267 million in the comparable period. Impaired loans for the half-year increased 61% to EUR 8.6 billion at September 30 from EUR 5.3 billion at March 31, 2009.

Group loans and advances to customers, net of provisions, at September 30 were EUR 131 billion, a decrease of 2% from EUR 134 billion at March 31, 2009, attributable to lower levels of economic activity and a consequent reduced demand for credit, as well as higher impairment provisions at September 30.

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