* Impairments remain high due to "severe recession" -dep CEO
* Takes 379 million euros in bad debt provisions in H1
* Will not participate in government-backed "bad bank"
* Deputy CEO does not rule out redundancies among staff
By Carmel Crimmins
DUBLIN, Aug 11 (Reuters) - National Irish Bank (NIB), part of Denmark's Danske Bank, expects loan loss provisions to peak this year, but cautioned that bad debts would remain high as the Irish economy suffers severe recession.
"Yes I think they will (peak) but we are very cautious," said Kevin Gallen, deputy chief executive of National Irish Bank, echoing a similar view from larger domestic rival Allied Irish Banks last week.
"We expect that impairments will continue to be high in the context of what is continuing to be very severe recession here in Ireland," Gallen told Reuters.
NIB took 379 million euros ($536.9 million) in bad loan provisions for the first half this year, representing over 7 percent of NIB's loan book, and resulting in a pretax loss of 341 million euros.
The Irish government will create a "bad bank" in the autumn to cleanse the domestic banking sector of risky property assets with a nominal value of 90 billion euros, which are choking the flow of credit.
Gallen said NIB, which is covered by a Danish government guarantee, would not transfer any assets to the state-run National Asset Management Agency (NAMA) because of the support already offered from its parent company Danske Bank.
"We will definitely be working closely with NAMA because they are going to be the biggest property company in the world and there is no doubt we will have some mutual clients."
NIB's parent, Denmark's largest financial group, reported a bigger-than-forecast drop in second-quarter pretax profit on Tuesday after it was hit by loan writeoffs in the Baltic region and Ireland.
Danske Bank wrote off its investment in NIB earlier this year due to the grim state of the former "Celtic Tiger" economy and the lender was one of the first banks in Ireland to hike its loan loss estimates, setting the stage for a sector-wide recalibration.
JOBS
NAMA is expected to reshape the Irish financial sector and some foreign banks are expected to play a less prominent role after getting badly hit when the property bubble burst.
Gallen reiterated that Danske Bank was committed to the Irish market. NIB's operating profit before provisions was up 34 percent to 38 million euros in the first half, helped by a stiff line on costs, which fell six percent.
Banking unions have warned that NAMA will herald job cuts and NIB, which let many of its temporary staff go in March, is not ruling out redundancies among its 631 permanent employees.
"In terms of permanent staff we have no plans for redundancies in 2009. In the current economic environment it's obviously something we keep under review. There can be no guarantees."
Last week, Ulster Bank, a unit of Royal Bank of Scotland, said it would be looking for 250 voluntary redundancies on top of 750 job cuts earlier this year. ($1 = 0.7059 euro) (Editing by Gilbert Kreijger)