AIB says its operating environment continues to be extremely difficult.
Allied Irish Bank group has reported a pre-tax loss of 872m euros for the first six months of its financial year.
The bank, which trades as First Trust in Northern Ireland, said its asset quality deteriorated further, mostly in its property portfolios.
First Trust lost £41m which led to a £28m loss at AIB's UK operation.
Criticised loans, or loans that are being watched closely by the bank, have increased to 25% of customer loans, 8.1% of which are impaired.
AIB said its operating environment continues to be extremely difficult.
It added that First Trust's operating profit, before provisions, was £50m for the first half of 2009.
However, its loss before taxation was £41m because it has had to set aside £91m for loans it doesn't expect to be repaid.
It said this reflected the "deteriorating conditions in the Northern Ireland economy."
Net interest income was 16% lower than the same period last year reflecting a combination of lower interest rates and increased competition.
The bank said it making more money through lending due to the "re-pricing of customer loans to reflect market conditions."
Staff costs at First Trust have fallen by 13% in past six months which the bank said is due to a reduction in staff numbers along with a freeze on pay increases and "a strong focus on discretionary expenditure."
Unlike British banks, HSBC and Barclays, Allied Irish did not get a boost from buoyant investment bank earnings, with revenues from asset management, investment banking and wealth management all down.