Figures confirm Anglo's liquidity

Anglo Irish Bank can pay more than twice its weekly and almost double its monthly requirements under the liquidity rules for Irish banks, according to figures provided by the bank to analysts. Simon Carswell,Finance Correspondent

The bank gave the data to a number of analysts earlier this month to rebut rumours in the marketplace about its funding. The bank also wanted to reassure investors that it had solid funding and was not exposed to the high cost of borrowing in the wholesale funding markets.

To meet the liquidity test, Irish banks must be able to show that they have sufficient cash to meet 100 per cent of their outgoings for the following week and 90 per cent for the next month.

Anglo Irish Bank shows in its figures that, as of October 31st, 2007, it could meet 242 per cent of its outgoings for the following week and 171 per cent for the following month.

The bank raised a €2 billion covered bond in the capital markets on November 5th through its UK operation in which it used some of its loans as collateral.

The bank raised the bond at rates between 20 and 40 basis points below the Libor (London) interbank borrowing rates.

This is not the first covered bond raised by the bank this year: it created a €1.5 billion covered bond in the spring. The bank has a balance sheet of €70 billion.

Anglo is in a closed period until its results on November 28th, but it contacted analysts earlier this month to reassure them that its lending this year has been more than 90 per cent funded by customer deposit growth.

The bank's lending is more than covered by customer deposits and long-term wholesale funding. Some 64 per cent of the bank's funding comes from customer deposits - 26 per cent from retail deposits and 38 per cent from non-retail. Analysts have described Anglo's customer base as "sticky". The remaining 36 per cent of the bank's funding is raised in the capital markets.

The bank's retail customer funding is growing at about €600 million a month and non-retail deposits by €750 million a month. Non-retail deposits average about €4 million.

Anglo's interbank borrowing has remained unchanged since August and the bank is a net lender in the interbank market.

Irish financial stocks have fallen by about 40 per cent since the start of the year. Anglo Irish Bank's share price fell by 5.75 per cent yesterday to close at €9.51. It has fallen by 46 per cent since its 2007 peak of €17.85 on May 31st.