Anglo’s attempts to gloss over problems exposed

ANGLO IRISH BANK’S attempts to gloss over its problems to the Government in the weeks leading up to the state guarantee became clear yesterday.

In documentation released to the Public Accounts Committee it emerged the bank’s officials made a presentation to the Department of Finance on September 18 in which it said it expected to be highly profitable in 2009.

It said maintaining a strong asset quality was at the core of its business plan. And it had “no requirement for external capital”.

The bank said its average loan was only 73% the value of the assets and, with a “back to basics” approach, it would focus on protecting its balance sheet. The bank said it had consistently delivered to shareholders and it had a strong management team.

Anglo said all its lending was secured and cross-collateralised.

The consensus, it said, was that even in a weaker market just 0.7% of its loans would be impaired in 2009.

In March 2008 it said just €358 million, out of a loan book of €69 billion, was under pressure – half of this specific to individual customers.

A week later Merrill Lynch spoke to Pricewaterhouse Coopers, who had reviewed Anglo, and estimated the impairment provision was 3% of its book. All emphatically underestimated the reality.

The bank claimed it had survived 25 years of up and down cycles because it focused on a strong asset base. Within days of its presentation external consultants warned the Government Anglo would run out of money within days. At the same time Anglo was looking for more than €7bn in secret funds from Irish Life and Permanent to puff up its books. When this was discovered, it pushed the bank over the edge.

In the following 15 months the bank reported a loss of €12.5bn. It is sending €35bn of its loans to NAMA. And of the remaining €36bn on its loan book, it still expects 13% to be impaired.