THE COST of bailing out State-owned Anglo Irish Bank may rise above the estimated €22 billion required, the bank conceded yesterday, as the lender posted the biggest loss in Irish corporate history and received a further €8.3 billion injection from the Government.
The latest injection, which brings the running cost of bailing out Anglo to €12.3 billion, covers a loss of some €12.7 billion reported yesterday for the 15 months to December 2009.
The European Commission has launched an inquiry into the State’s support for the bank under which it will scrutinise whether the cost of winding it down exceeds the cost of injecting billions of fresh capital.
Minister for Finance Brian Lenihan has said the bank may require a further €10 billion to meet future losses and cover the cost of restructuring the bank to keep it open.
However, Anglo’s chairman designate Alan Dukes said yesterday he could not rule out the need for further State investment beyond the potential €22 billion bailout.
“There is a provision already that the Minister made yesterday [Tuesday] for up to a further €10 billion. I would love to say that would be the end of it but I can’t with any confidence say that today and nobody can,” Mr Dukes told Newstalk radio.
Later he said the amount of capital the bank would require may not become clear for some time. “I would love to be in a position to say we can produce a final definitive figure but the reality is that until we see the property market beginning to rise again nobody can give you a definitive figure,” he said.
It also emerged yesterday that Anglo has set aside money to cover potential losses on loans owing by the Quinn Group, the business controlled by Fermanagh entrepreneur Seán Quinn. The group owes Anglo about €2.8 billion. Quinn Insurance, the group’s insurance subsidiary which owns Quinn Direct and Quinn Healthcare, was put into provisional administration by the High Court earlier this week.
Anglo posted the record loss after writing off €15.1 billion on bad loans, including €10.1 billion on €36 billion in in loans moving to the National Asset Management Agency (Nama).
The rising cost of the Anglo bailout intensified the debate over whether the Government should reverse its position and close the bank down.
The bank’s chief executive Mike Aynsley acknowledged that the cost of the bailout was “a staggering amount of money” but stressed that keeping the bank open and reinventing it as a business lender would be cheaper than shutting it down immediately or over 10 years.
The cost of liquidating Anglo would be far worse – above €35 billion – while winding the bank down over 10 years would cost €19 billion to €30 billion, he said.
The bank revised upwards the wind-down and liquidation figures to take account of the higher-than-expected 50 per cent discount revealed by Nama earlier this week.
Anglo had expected Nama to apply a 28 per cent haircut to the first €10 billion in loans moving to the agency early this month, said Mr Aynsley.
If Anglo were shut or run down the Government would also have to provide up to €30 billion to fund the bank in a wind-down and up to €70 billion in a liquidation as deposits would flood out, he said.
“We are basing it on the objective of paying back as much of the taxpayers’ investment as possible and limiting the impact on the State – this is really the best or least worst option.”
The bank said the Government would also have to provide loans of up to €15 billion to Anglo to fund the business to keep it running.
Anglo expects almost €109 million of some €155.3 million owed by former directors, including Sean FitzPatrick and David Drumm, will not be repaid. Anglo also made deferred bonus payments to four directors in December 2008, weeks after the Government guaranteed the banks.