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Anglo posts €8.2bn first half losses – the biggest in Irish history

Bank chairman Alan Dukes says a good-bad split is the cheapest option – in direct conflict with the Department of Finance.

Anglo's losses will mean the bank will require another public recapitalisation - on top of the €24bn it's already received.
Anglo's losses will mean the bank will require another public recapitalisation - on top of the €24bn it's already received.
Image: Alex E. Priomos via Flickr

ANGLO IRISH BANK has announced its half-yearly results – and posted the largest loss in Irish corporate history.

The state-owned bank posted losses of €8.2bn for the six months to June 30, with loan impairment charges hitting €4.8bn.

The losses are equivalent to about €1,840 per person for every man, woman and child living in Ireland.

The bank’s balance sheet was also massively dented with a loss of €3.5bn from the haircut on the €10.1bn of loans transferred to the National Asset Management Agency.

Finance minister Brian Lenihan has already agreed to offer the bank whatever further recapitalisation it needs to ensure that its balance sheet remains within regulatory requirements. The amount it will need will depend on the NAMA haircut on future transfers, and on the performance of the commercial property market.

Describing the first year as “an exceptionally difficult period“, the bank reported €2.3bn in impairment provisions relating to assets it will offload to NAMA, after recording an operating profit of €151m before impairment and NAMA charges kicked in.

Its net interest income was €352m for the six months, down 59% on the six months to March 2009. The bank’s assets were valued at €87bn, which included €16.1bn of NAMA-eligible loans and €8bn of loans to other banks.

The Anglo results are now likely to dominate tomorrow’s Cabinet meeting when the Green members will propose that the bank be wound down as quickly as possible.

Dukes: Predicting final recapitalisation costs is “taking a pure punt”

Speaking on RTÉ’s Today with Pat Kenny, Anglo chairman Alan Dukes explained that the bank had accounted for a haircut of about 28% on the loans being offloaded to NAMA, and its provision was hit when the ultimate haircut was 55%. He insisted the losses would have been lower if the haircut sought by NAMA had been closer to its initial indications.

The bank was using as much information as was available to it, Dukes said, adding that it would “taking a pure punt” to suggest what the final bill for the state’s bailout of the bank might be.

The former finance minister insisted, however, that the good bank-bad bank would be the cheapest option for Anglo’s future, because assets being sold off would fetch better prices on the market than it would if investors knew the bank was simply being liquidated.

His statement was in direct opposition to the advice yesterday from the Department of Finance which said the long-term wind-down would be the cheapest option for the taxpayer.

Commenting on the possibility of a debt-equity swap for some of the bank’s debtors as an alternative method of raising capital and simultaneously offloading debt, Dukes said the matter was a decision for government but was not one he would recommend until the NAMA process had been finalised and until the European Commission ruled on the good bank-bad bank split.

Dukes said he was acutely aware of the bank’s duty to operate in the public interest, but the board’s decision to split the bank into two may be held up by the European Commission which is due to rule on the restructure at some point in September.

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Gavan Reilly

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