Bank of Ireland PLC (IRE) said Friday that demand for new lending remains muted in a "difficult and challenging" economic environment, but it maintained its current impairment charge forecast.

The bank still sees an impairment charge on loans and advances to customers of around EUR6 billion in the three years to March 2011, which includes a EUR1.4 billion loan impairment charge in the year to March 31, 2009.

It said: "Downside risk to the loan impairment charge estimate arises in the event of a further deterioration in economic conditions or further prolonged low levels of activity in residential and commercial property markets."

In a trading update, Bank of Ireland said maintaining the stability of the bank remains the primary management objective, and that it expects legislation for the government "bad bank" to be enabled by the autumn.

Ireland is setting up the National Asset Management Agency, or NAMA, to take potential exposure of EUR80 billion to EUR90 billion of commercial property and land loans off the banks' books - the first real euro-zone test of an industrywide, government-sponsored "bad bank."

The government has nationalized Anglo Irish Bank, and has injected EUR3.5 billion each in Bank of Ireland and Allied Irish Banks PLC (AIB) in return for 25% stakes in each of them.

Last month, the Bank of Ireland announced the successful completion of a debt buy-back program of euro, sterling and U.S. dollar Tier 1 securities. The equity accretion of this initiative is around EUR1 billion.

Shares closed Thursday down 8% at EUR1.53 on the Irish Stock Exchange ahead of Friday's Annual General Meeting. Analysts remain concerned over its loan losses. The share price has plummeted from EUR5.33 from this time last year.

Company Web site: http://www.bankofireland.com

-By Quentin Fottrell, Dow Jones Newswires; 353-1-676-2189; quentin.fottrell@dowjones.com