Anglo Irish may need further €10bn

ANGLO Irish Bank has admitted there is a chance it will need a further €10 billion of government money this year as it posts the biggest ever loss for an Irish company.

Anglo reported a pretax loss of €12.7bn for the 15 months to end of December 2009 after writing off €15bn in bad loans.

According to the bank’s annual report, outstanding loans to directors totalled more than €150 million at the end of December 2009, with provisions for impairment of more than €108m.

The bank said that management is working with the Finance Minister on a plan to “significantly restructure the bank’s balance sheet, risk profile and culture, in order to restore viability”.

In the 15 months, the bank said it had made an operating profit of €2.4bn before impairments, including a gain of €1.8bn on the repurchase of capital securities.

Anglo said the results reflected an “exceptionally difficult 15-month period”.

Davy economist Rossa White said that the cost of cleaning up Anglo may add €20bn to government debt over 10 to 15 years.

“It’s unprecedented, but manageable,” he said.

NAMA will pay a discount of 50% on the first block of loans it is taking from Anglo.

Mr Lenihan said that Anglo may seek to change itself into a “smaller and stronger” bank.

It could be profitable in the medium term and be sold in five years to 10 years after the state pumps in more capital, he said.

The European Commission, the European Union’s executive arm, yesterday approved the recapitalisation of Anglo and opened an investigation into the bank’s restructuring.

The Government seized control of the bank in January 2009.

Winding down the bank now would cost more than €30bn, Mr Lenihan said yesterday in the Dáil.

The state is also bailing out other banks after what the minister said were “appalling” lending decisions.

For the 15 months to the end of December 2009, Anglo said its bad debt writedowns totalled €15.1bn, of which €10.1bn went to NAMA.

It is pushing ahead with cost-cutting measures so that it can “manage its balance sheet the best it can”.

It said that the value of loans to be transferred to NAMA total €35.6bn at a carrying value of €25.5bn.

After this transfer, it said, Anglo would have about €36.5bn in customer loans with “cumulative specific” provisions of €3.7bn.

It said, however, that if the “haircut” is more than what it estimates at the time of transferring these loans there is a chance it will need further Government funding.

It said that it wants the public to “know and understand what’s going on” at the bank.

Anglo chairman Donal O’Connor said in the annual report that the bank had wildly underestimated the expected knockdown on their assets last year.

“Unfortunately, our stress scenarios have been more than realised and reflect the very severe deterioration in asset values in the marketplace since March 2009,” he said.