Just don't mention the 'A' word
Mike Aynsley, chief executive of the Irish Bank Resolution Corporation, admits he is overly sensitive to the name Anglo, insisting that the bank has been ‘re-engineered’ and is entirely different to what went before
DON’T CALL Irish Bank Resolution Corporation “Anglo Irish Bank”. Mike Aynsley doesn’t like it. He is chief executive of Irish Bank Resolution Corporation, and Ireland’s most toxic bank hasn’t been “Anglo” since it was renamed last year.
There was a joke that a swear box was positioned in the bank’s head office on Burlington Road in Dublin 4 last year. Any time any senior member of staff mentioned the ‘A’ word, they had to dig in their pockets.
Aynsley admits he is “overly sensitive” to people continuing to call the bank Anglo when the old management team has been replaced by a new group of mostly foreign bankers, and the company has been “re-engineered” from a lender to a loan recovery business.
The new team has “spent an enormous amount of time purging those sins of the past”, he says. Aynsley hopes the bank’s approach to recovering as much money as possible for the Irish taxpayer – for example, the money due from Seán Quinn and his family – will prove to people the bank is very different now.
“Everything that the bank was, and the focus that the bank had, has been fundamentally changed. Yet because of the ill-feeling about what Anglo has done to the country, people find it very difficult to understand that what we do is fundamentally different,” he says.
“People can hate an organisation, but why should they hate a bunch of people who have come in from the outside, who weren’t part of the problem?”
While the Anglo sign may be gone from above his door, Aynsley will be dealing with the bank’s legacy for some time to come, while the State will be bearing the €29.3 billion cost for even longer.
Aynsley’s job appears simple on paper. Wind down the organisation over time and get back as much of the loans as possible.
Two years ago he said the final cost of Anglo – leaving aside Irish Nationwide Building Society, which IBRC is also winding down and which is costing the State €5.4 billion – will be between €25 billion and €28 billion. He is sticking with that estimate.
Speaking ahead of his third anniversary as chief executive of the State-owned bank today, he says it can be closed before 2020, the targeted date set by the Government, but declined to say when exactly.
Aynsley has run a bank that posted the biggest losses in corporate history. Since taking over, the cost of the bank to the State has risen from €4 billion to €29.3 billion, while it has made accumulated losses of €28 billion since he joined in September 2009.
The losses are staggering, but have arisen as a result of a property lender operating in a market where values have fallen between 65 per cent and 68 per cent.
“This is a market dislocation of mammoth proportions that you might see only once every 100 years,” says Aynsley.
He arrived in Dublin three years ago thinking he was hired to save a bank, not wind one down. Several attempts to proceed with his good bank-bad bank plan to rebuild a viable business lender out of the ashes of Anglo Irish Bank failed as the European Commission blocked it.
“They were quite open about the fact that their view was that any bank that has destroyed that much value doesn’t deserve to be allowed to survive, and it is to be punished,” says Aynsley.
Looking back, nobody foresaw the scale of the problems, he says, nor how to react to those problems.
“I don’t think anyone in government or out of government had really any idea at that stage of just how bad the situation was and how deep this spiral would go,” he says.
Charged with shutting the bank down, the Australian has since reduced the size of the business. The number of staff has dropped from 2,800 to about 1,000, while the number of offices the bank operates from has fallen from 19 to nine since 2009.
The size of the nationalised bank’s balance sheet has almost halved – from €100 billion to €53 billion – though much of this value comprises the remaining €27 billion of State promissory notes sitting on its books which were used to fund the bailout.
Loans have fallen from a peak of €73 billion to a face value of €27 billion or €16 billion, taking into account the provisions booked by the bank to cover bad debts.
The bank offloaded €34 billion of loans to another State-owned entity, the National Asset Management Agency, while the €7 billion US loan book was sold and €1.9 billion of loans in the UK were either repaid or disposed of last year.
The former Anglo deposit books were moved to Allied Irish Banks.
So the bank is a shadow of its boom-time self. But a workforce of 1,000 people still seems like an awful lot for a zombie bank?
Aynsley says about 250 staff work in the bank’s Nama unit, and the remaining loans on its books are complex and require skilled staff. Reducing numbers more quickly could damage the bank’s capacity to recover loans, he says.
Aynsley says the bank is “into the hard yards now”, a process of winding down the rest of the business loan by loan; in the absence of a solution to the euro debt crisis, there will not be another sale of a big loan portfolio.
For that reason, closing the bank more quickly than planned will add to the State’s bill, he says.
“We have always said that that can happen, but there is a price in doing it,” he says. “You kill it off quickly, it destroys capital. It is basic market dynamics – if there are no buyers in the market, you can only bring buyers in by reducing prices to a level in which buyers are interested. That means a hit on capital.”