The country's banks offered the three-month breaks in March and agreed to extend them to six months as the Irish economy emerges from lockdown at a slower pace than most of Europe.

Almost half of affected PTSB customers returned to regular payments by the end of July, 40% extended and 14% were discussing their options, the bank said on Tuesday.

"If the macroeconomic environment does not deteriorate, we would expect that the lion's share of provisioning has been reflected at the moment," the bank's recently appointed chief executive, Eamonn Crowley, said on an analyst call.

PTSB reported a 57 million euro first-half pretax loss, down from a 28 million euro profit a year ago, and said it expects to remain loss-making for 2020.

The bank's shares were down 1% at 0.49 euros by 0920 GMT.

Excluding the impairment charge, which was higher than the potential 50 million euros flagged in May, the mortgage lender's profit before exceptional items fell to 23 million euros from 42 million euros in the first half of 2019.

PTSB said it saw more positive signs of recovery in July and that a range of more encouraging indicators than previously mean that new lending could be about 40% lower than the 1.7 billion euros it lent in 2019. That compared with a previous estimate of a 40-50% decline.

Crowley told analysts that the fall could be less severe and that the bank was being slightly conservative.

PTSB, which is 75% state-owned, said its fully loaded core Tier 1 capital ratio - a key measure of financial strength - fell to 13.9% from 15.2% three months earlier. Its net interest margin also slipped slightly to 1.75%.

By Padraic Halpin