Anglo no longer 'systemic risk'


Anglo Irish Bank chief executive Mike Aynsley has said the Anglo Irish Bank is no longer a "systemic" risk, and estimated the final cost of bailing out Anglo Irish Bank could be lower than expected. 

Mr Aynsley said the final bill could be between €25 billion and €28 billion, lower than the Central Bank's previous estimates of up to €34 billion under worst-case stress-test scenarios.

The Government has poured €29.3 billion into Anglo Irish to date.

Speaking at the publication of Anglo’s first half results today, Mr Aynsley said that one reason why the final bill for Anglo may be lower was that the imminent sale of Anglo’s $9.6 billion US loan book would reduce an element of “stress risk” for the bank.. If the final bill for Anglo is lower than previously estimated, this could result in the lender being left with a capital surplus, which would be ultimately handed back to the State.

Anglo’s results for the first six months of the year have shown a dramatic reduction in the bank’s losses compared to the same period last year, as the bank continues to wind-down its operations.

First half pre-tax losses at the state-owned bank were €101 million, compared to €8.2 billion in the first half of 2010. The losses included a €214 million loss on the transfer of the bank’s deposit book to AIB in February.

However, this was offset by a €601 million net reduction in the loss reported on the transfer of assets to Nama, after full due diligence was completed. Total operating expenses were €157 million during the year, while non staff costs have increased to €60 million, mainly due to an increase in professional fees.

Mr Aynsley said these costs would continue due to the complex and specialist nature of the restructuring and recovery processes involved in dealing with Anglo Irish Bank’s loan portfolio.

He also pointed out that the reduction in the size of Anglo’s balance sheet meant that it was no longer the “systemic risk” to the Irish banking system than it once was.  “When you look at the structure and size of the balance sheet, it is no longer a systemic issue,” he said. 

He pointed out that the bank’s net loan assets has been reduced from €69 billion at December 2008 to an estimated €16 billion, once the sale of the company’s US loan book is complete. The bank is also taking on about €2 billion of Irish nationwide assets.

“We are pretty happy with where we are at at this point. We had a specific target of getting under every single loan and we have been concentrating on getting to the bottom of problems, examining each loan, over the past two years,” he said.

Mr Aynsley added that there had been an “enormous” interest in the company’s US loan portfolio, due in part to the strong financing climate in the US. Bidders, which are understood to include some of the big name American banks such as JP Morgan and Wells Fargo, are currently being told of the outcome of their bids.

While the bank declined to comment on whether the loans will be sold off in separate tranches, the process should be complete by the end of the year.