‘Vulnerable’ bank to deliver €16bn

BANK of Ireland, thought to be the most vulnerable of the two big Irish banks, will transfer €16 billion in bad property and other related loans to NAMA under the plans outlined yesterday by Finance Minister Brian Lenihan.

The bank’s downward spiral has been pretty dramatic with profits of €1.9bn in the year to end March 2008 fading to a loss of €7m in its last financial year.

The bank’s former chief executive Brian Goggin made national headlines when it emerged he walked away with a total wage of close to €4m in the financial year 2007 when the property market was at its peak.

The bank said it will issue a response to NAMA today which will incorporate the bank’s pre-close trading statement for the six month period to September 30, 2009.

At this stage Bank of Ireland is 25% owned by the state, as is AIB, but the fact that it has less exposure to the property and construction sectors means the Government will not be forced to take a majority stake in the group. A quick glance at its property lending shows a sharp rise in its book over the past few years. At end March 2003, lending to those sectors stood at €6.6bn but that had shot up to just under €40bn at the end of March 2009.

Ireland accounts for 58% of total lending with the British lending mainly responsible for the bulk of the other 42% of its lending. Of its total loan book of over €135bn, just under €40bn is in property and construction of which €19.3bn is in Ireland and €14.5bn in Britain.

Of that, over €3.5bn is categorised as bad debts which is the biggest portion of the group’s total bad debt figure of just over €5.3bn.

Bank of Ireland is probably fortunate that nearly 50% of its property and land activities are in Britain. With the Olympics in 2012 the outlook for property there is said to be picking up.