Allied Irish Banks, the Republic's largest bank, has issued a profits warning as it more than doubled the charge it makes for future bad loans to reflect the deteriorating domestic property market.

The bad debt provision in the year to the end of December is now expected to be around €950m ($1.2bn) - equivalent to 0.75 per cent of average loans, or 75 basis points. It was driven in large part by a 300 basis point charge on its Irish residential development book.