€10bn of loans set for transfer to 'new' Anglo - Aynsley

AS LITTLE as €10 billion out of Anglo Irish Bank’s €70 billion pre-nationalisation loan book may be worth transferring to the proposed “new” Anglo Irish Bank, according to Mike Aynsley, the bank chief executive.

In a document prepared for a management briefing yesterday Mr Aynsley said the bank was sifting through its loan portfolio “loan-by-loan” to asses which loans are suitable for inclusion in the new bank – known as BankCo. “It is conceivable that by the time we get through this process the final transfer amount could be closer to €10 rather than €15 billion,” he warned.

“We cannot afford to transfer loans to BankCo that are in any way marginal and therefore have the capacity to require further State aid should they deteriorate,” he said.

The Government has sanctioned a plan to split Anglo Irish Bank into a viable bank and an asset recovery company which will manage non-performing loans that are not transferred to the National Asset Management Agency (Nama). Around €36 billion of land and development loans are transferring to Nama, with the balance of around €20 to €25 billion of non-performing loans earmarked for the asset recovery company. The remained will form the nucleus of the viable bank.

The plan is being reviewed by the European Commission and “the specific and detailed form of the split remains a concern due to residual issues around the loan portfolios,” according to Mr Aynsley.

The bank had hoped to secure approval before the summer break, but Mr Analyse told his colleagues that “the timeline is now September as the summer holidays are here. The important thing to keep in mind is that we are in detailed discussions with the EC.”

He added that the commission, if it approves the plan, will want to see an operational split in the bank followed by a full physical split at a latter dates. “The current timeline is targeting operational split by December 31st this year followed by full physical split by December 31st, 2011,” he said.

The chief executive also addressed the role he sees for the viable bank in the Irish banking system. He said that, in his view “a suitable model for Ireland appears to be three to four large domestic banks with a periphery of international banks, insurance and other financial service companies that focus on complementary or niche activities”.

Anglo could “either form a point of consolidation, or participate as part of the consolidation agenda for Irish banking” in this context.

Mr Analyse, who was appointed after the Government takeover of Anglo Irish Bank last year, said “I could never have accurately foreseen the extent of the carnage wrought by the practices of previous management and the impact it would continue to have on the bank throughout my first year”.

He laid a significant portion of the blame of the losses incurred by the bank on the previous management lead by chief executive David Drumm and chairman Seán FitzPatrick. “Previous management must bear blame and responsibility for the failure of governance, risk management and other critical management processes – and, in some areas, significant blame in my view.”