Anglo posts new record loss, as government breaks it up

DUBLIN Tue Feb 8, 2011 7:10pm GMT

Pedestrians walk past a branch of Anglo Irish Bank in Dublin, September 30, 2010. REUTERS/Cathal McNaughton

Pedestrians walk past a branch of Anglo Irish Bank in Dublin, September 30, 2010.

Credit: Reuters/Cathal McNaughton

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DUBLIN (Reuters) - Anglo Irish Bank said on Tuesday it expected to make a loss of 17.6 billion euros (14.9 billion pounds) in 2010, breaking its own record for losses by an Irish corporate, as the state began to auction off its deposits and assets.

The nationalised lender, which Dublin is in the process of winding down, previously posted a loss of 12.7 billion euros for the 15 months to December 2009, the largest in Irish corporate history at the time.

Ireland's debt management agency said earlier on Tuesday that it will commence an auction process for the sale of the deposits and assets of Anglo and fellow state-run lender Irish Nationwide Building Society.

Ireland submitted restructuring plans to the European Commission last week for winding down its two worst lenders, meeting its first major banking deadline under an 85 billion euro IMF/EU bailout agreed late last year.

Dublin has pledged to radically restructure its troubled banks, at the root of its financial crisis, and received clearance from the Irish High Court on Tuesday to push through with plans to quickly deal with the two troublesome lenders.

Ireland's debt agency, charged with overseeing much of the restructuring in the sector, said deposits would be transferred in a seamless manner and that an orderly workout of the lenders' loan books would involve their amalgamation into a new entity.

Anglo, devastated by years of reckless lending and scandal, said it anticipated the sale of its deposit books would be completed in the short term, and that it would engage in detailed planning for the merger in the first half of this year.

"What can you say, there isn't much new news other than the details about the wind-down," Kevin McConnell, an analyst at Bloxham Stockbrokers said. "Most of this was as expected."

COMPLYING WITH CAPITAL REQUIRENMENTS

Anglo said its loss for the year included impairment charges of 7.8 billion euros and a loss of 11.5 billion euros on the disposal of risky property loans to Ireland's so-called "bad bank," the National Asset Management Agency (NAMA).

The bank, which said the financial information released on Tuesday was not yet audited, added that its customer deposits had declined to 11.1 billion euros at December 31, 2010 from 27.2 billion a year earlier.

It also saw its reliance on borrowings from the European Central Bank (ECB) and Ireland's central bank rise to 45 billion euros at the end of 2010 from 26.3 billion six months earlier.

Anglo said 28.1 billion euros of that was part of the 51.1 billion euros of special funding the Irish central bank provides to the country's lenders. Irish banks reliance on ECB funding stood at 132 billion at the end of last year.

Ireland so far estimates that recapitalising nationalised Anglo Irish will cost the state between 29.3 and 34.3 billion euros, while it has already poured 5.4 billion euros into building society Irish Nationwide.

The bank's chairman said he expected the total cost to come in towards the lower end of that range and also warned the euro zone that it needed to quickly replace the ECB's funding of Irish banks.

Anglo said its receipt of a 6.42 billion euro promissory note -- an instrument which spreads actual payments over a decade or more -- brought the total cost of its capital support to 29.3 billion euros at the end of last year.

It said that notwithstanding significant further losses in the year, it remained in compliance with minimum regulatory capital requirements set by the country's central bank.

Propping up Anglo Irish helped push Ireland's already large budget deficit to an eye-watering 32 percent of gross domestic product (GDP) last year.

Ireland's main opposition party Fine Gael, favourites to lead the next government after a February 25 election, have threatened to shut down Anglo by the end of the year, but the bank's chief executive told Reuters that could cost taxpayers up to 12 billion euros.

(Additional reporting by Kate Holton; Editing by Ron Askew)

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