Anglo Irish reports massive €8.2 billion first-half losses


The chief executive of Anglo Irish Bank Mike Aynsley said today the lender may need no more than about €25 billion in capital from the State.

He was speaking after the State-owned bank announced a €8.2 billion loss for the first six months of 2010, well in excess of the previous six-month deficit of €4.1 billion and a new Irish corporate record for a loss.

Mr Aynsley’s comments are at odds with an estimate from Standard and Poor's, which last week cut Ireland’s credit rating to AA minus, in part because it said the Government may have to inject as much as €35 billion into Anglo.

Commenting on the bank's latest results, Minister for Finance Brian Lenihan said: "the results are in line with expectations but that is, of course, cold comfort given the scale of the losses."

The Minister said that the Government was in advanced talks with the European Commission over the future of Anglo and said his department had sent the final documentation on the future of the bank to Brussels today.

Anglo wants to split the post-Nama €36 billion loan book into a good bank and bad bank, with a view to selling the good bank and running down the bad bank over time. The plan is awaiting European Commission approval.

Mr Lenihan admitted today that the bank had posed "a very serious problem for the economy" and said the Government, the Anglo Irish board and the Commission was working to bring "certainty and finality" to the bank "problem."

The bank last reported results in March when it announced a loss of €12.7 billion – the highest in Irish corporate history – for the 15-month period to the end of last year after writing off €15.1 billion on bad loans and investments, primarily due to the property crash.

The spread between Irish 10-year bonds and German bunds widened 3 basis points today to 356 basis points after the results were published.

The spread, which helps determine how much interest the State must pay for its borrowings, was 306 basis points on May 7th, just before the EU announced a €750 billion financial backstop for the region's most indebted nations.

Credit-default swaps on Irish sovereign debt climbed 10.5 basis points to 352, the highest level since March 2009. Swaps on Anglo Irish Bank jumped 15 basis points to 614, the highest in more than 13 months.

Anglo is still concerned "that the commercial property market in Ireland doesn't seem to have stabilized," chief financial officer Maarten van Eden said.

Commercial real estate prices have fallen 58 percent from the peak of the market in 2007, according to Patrick Koucheravy, property economist with CB Richard Ellis in Dublin, citing Investment Property Databank figures.

The bank's capital needs rose as the government's bad bank, also known as NAMA, paid less than originally expected for Anglo's loans.

NAMA, formed by the government to aid the nation's ailing lenders, applied a discount of 62 percent to a second batch of loans it bought from the lender.

Anglo previously announced a loss of €4.1 billion for the six months to the end of March 2009.

Some €10.1 billion of the impairments taken during the 15 months to December 2009 related to a 28 per cent write-down on the €36 billion in loans – half the bank’s original loan book – that are moving to Nama.

Anglo has so far received €14.3 billion in capital from the Government in cash and by way of promissory notes. The European Commission has approved a further €10 billion, and Central Bank governor Patrick Honohan has said the Anglo bailout will not exceed €25 billion.

Speaking today, the bank's chairman Alan Dukes indicated the capital needs would amount to about €24 billion.

"Looking at what's happened in the first six months and projecting as far as we can for the remainder of this year it would seem to us that we can say within the figure of €24 billion," said Mr Dukes on RTÉ radio.

"I'm reluctant to say that will be the figure because to be perfectly frank, I think that anybody today who says that they can put a total figure on what the total losses are going to be is taking a pure punt. Nobody knows."

Bank shares on the Dublin market fared well in the circumstances with Irish Life and Permanent seeing most of the action on the back of interim results which showed operating loss narrowed by 80 per cent from €51 million to €10 million in the first half of the year. IL & P finished 4.3 per cent higher at €25.92.

The two other banking stocks rallied in late afternoon. AIB finished the session pretty much flat at €0.77, having fallen as low as €0.72 during the day. Bank of Ireland added 4 per cent or 3 cent to finish at €0.77.