Anglo deal to net BoI €41m
Under the promissory note system, the State is due to pay €47.4bn over a 20-year period to cover the costs of bailing out Anglo Irish Bank and Irish Nationwide, now merged as IBRC.
This year’s repayment of €3.06bn was due last month, but the Government announced a complex deal to avoid handing over cash.
Instead, it is issuing a long-term bond — essentially an IOU — which IBRC will use as collateral to secure the cash from Bank of Ireland, which will in turn get it from the ECB.
The ECB will charge interest of 1% on the money and Bank of Ireland 2.35%, meaning the latter will make profit of 1.35% on the €3.06bn — roughly €41m.
Responding to questions on the issue in the Dáil yesterday, Finance Minister Michael Noonan said: “Of course Bank of Ireland are doing this because they’re going to make money on it... but, you know, they’re entitled to their profit.”
The bank’s shareholders must first sign off on its involvement in the deal but Mr Noonan said there had been no indications to date that they would oppose it.
As for getting the ECB to agree a long-term cheaper alternative to the promissory note system, Mr Noonan said: “They take a very hard line.”
He said that while the ECB had not opposed the complex arrangement that saw the repayment deferred, it would be “tough” to get the institution to agree to a longer-term deal.
Meanwhile, Nama will report post-impairment profits of circa €200m for 2011, Mr Noonan has indicated.
Mr Noonan told the Dáil he had viewed Nama’s pre-audited accounts and they showed pre-impairment profits of €1.01bn for 2011 and post-impairment profits of about €200m.
He said projections carried out by the agency indicated that by 2020, when it is envisaged the bulk of its work will be completed, it could make either a small surplus or a “relatively small” loss.
On the basis of those projections, Nama believed it would ultimately break even, Mr Noonan said.
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