Anglo sends us deeper into the mire

Anglo posts record loss of €8.2bn in first half


BANK’S DEBTS: ANGLO IRISH Bank made an €8.2 billion loss for the first six months of the year after writing off €5.8 billion on loans sold or heading for Nama and €2.5 billion on loans remaining at the bank.

Provisions and impairments totalling €8.3 billion were offset by an operating profit of €151 million, which left the bank with an €8.2 billion loss for the six-month period. The loss surpassed the previous record set by Anglo last year for the highest loss for a six-month period taken by an Irish company.

The bank lost €4.1 billion for the corresponding period last year – the six months to March 2009.

Anglo chief executive Mike Aynsley said the cost of the bank to the taxpayer should not exceed €25 billion if the discounts on the remaining Nama-bound loans are not higher than 65 per cent.

He estimated that the bank would be left with an additional €6-7 billion in losses on future Nama transfers if the bank faced the same discount of 62 per cent applied on the second tranche of loans sold earlier this month.

Anglo is understood to have taken a further provision against possible losses on the €2.8 billion in loans owing by Sean Quinn and his family in the six-month period.

Anglo has sold €16 billion in loans to Nama and has a further €19 billion to sell. For every additional 5 per cent on the discount on loans sold, Anglo would require a further €1 billion, he said.

“If it went from 65 per cent to 70 per cent, it is going to go from €7 billion to €8 billion,” he said.

The additional €8.58 billion capital received from the Government last week would cover most of the expected losses on Nama, he said.

“This buffer will absorb most of the Nama losses, but it won’t be enough,”
he said, adding that the bank would need a further €1.5-2.5 billion, bringing the total cost of Anglo to €25 billion. As it stands, the State has committed a total of €22.88 billion.

The European Commission has approved a further €1.47 billion injection.
Anglo chief financial officer Maarten van Eden said this would be drawn as required.

Anglo also reduced the amount of loans it is transferring to Nama by €1.2 billion, meaning that it will transfer a total of €34.8 billion by the end of the process. Mr Aynsley said the €1.2 billion relates to US loans Anglo was now retaining.

The €8.3 billion first-half bad loan charge includes a provision of €3.5 billion on the €10.1 billion in loans sold to Nama at a discount of 55 per cent in the six months and an increase in the provisions on the other €24.7 billion Nama loans from 28 per cent to 38 per cent, writing off a further
€2.3 billion.

Anglo also set aside a further €2.5 billion to cover losses on the €38 billion on non-Nama loans. Mr Van Eden said the bank had set aside €7.5 billion to cover possible losses on these loans, but may need to take more provisions.