Dukes expects house prices to fall

 

Anglo Irish Bank chairman Alan Dukes expects property prices in the Irish market to continue to fall, he told an Oireachtas committee today.

"I don't see any substantial evidence to suggest that we have reached the bottom of the property market yet," he said told the Oireachtas Joint Committee on Finance, Public Expenditure and Reform.

Mr Dukes said the bank expected a decision on its objection to former chief executive David Drumm being discharged from bankruptcy in the US courts in the "relatively near future".

If the application is successful, the bank would be able to restart its legal challenge against him in Ireland.

"If that goes in the way we hope, that will leave it open to us to pursue actions here," he said.

The bank was prevented from pursuing its action against Mr Drumm in the Irish courts over unpaid loans of €8.6 million when he filed for bankruptcy protection in the US in October 2010.

Mr Dukes said he hoped the bank, which was nationalised in January 2009, would be able to wind down more quickly than the 10-year timeframe set under the EU-IMF bailout agreement.

"I wouldn't like to be held to this but we think that parts or all of it could be done a little bit more quickly," he said.

This would depend on how the economy and property market performed over the coming years, he said, adding that the bank hoped to reduce the cost of the bank to the State from the €29.3 billion to €34.3 billion range to €25 billion.

"We would hope to make very substantial progress in disposing of the UK within about five years," said Mr Dukes, who added the bank also aimed to wind down Irish Nationwide's €1.5 billion mortgage book, which it acquired in July, within five years.

"If the signs are appropriate, we would like to do it [wind down the bank] more quickly than a 10-year period," he said.

Anglo, which has responsibility for Irish Nationwide since a merger in July, has received no response to its request to the building society's former chief executive Michael Fingleton to repay the €1 million bonus he received after the bank guarantee and to return the €11,500 watch he received on his retirement in April 2009.

Mr Dukes said that the decision to impose losses on senior unguaranteed unsecured bondholders at Anglo and Irish Nationwide was a matter for the Government.

There are €2.9 billion of senior unsecured unguaranteed bonds at Anglo and €600 million at Irish Nationwide. There is a further €2.9 billion of senior debt at Anglo guaranteed by the Government.

The Anglo chairman said that he would "love" if all of the investigations into the bank concluded as they were "quite onerous" on staff at the bank and taking up considerable time. Mr Dukes said that the bank had "been through great lengths" to ensure that staff co-operated with the investigations.

He told the committee that a couple of weeks ago he had given his second interview to Garda fraud squad officers who are investigating various matters relating to the lead-up of the collapse of the bank in January 2009.

He said that it would inappropriate to comment on whether the bank would take action against its former auditors, Ernst & Young, while the investigation by the Chartered Accountants Regulatory Board was ongoing. Mr Dukes said that Anglo replaced the auditors with another firm of accountants Deloitte in 2009.

Mr Dukes said that he found it "rather odd" that the bank had not been invited to take part in discussions with the European Commission on restructuring plans submitted by the bank in 2009 and 2010 that were subsequently rejected by Brussels.

Appointed by the Government as a public interest director to Anglo in December 2008, Mr Dukes said he found it "quite appalling" the bank had "broken through every prudential limit" on its concentration of lending.

He said he discovered after joining the bank that it did not have internal records to show the full extent of lending to companies and borrowers. He was "amazed by the impenetrability and opacity" of the information available on loans within the bank and that the Financial Regulator had "put up with that opacity", he said.