Thursday 30 March 2017

€34bn Anglo bill could be revised down in weeks

The massive Anglo bailout is more than seven times bigger than the Government's first estimate. Photo: Bloomberg News
The massive Anglo bailout is more than seven times bigger than the Government's first estimate. Photo: Bloomberg News
Laura Noonan

Laura Noonan

RESCUING Anglo Irish Bank could cost the taxpayer as much as €34bn, but the figures could be revised downwards in a matter of weeks, sources said last night.

The massive bailout is more than seven times bigger than the Government's first estimate, and some €9bn higher than more recent promises of a bill below €25bn.

The €34bn bailout is based on a worst-case scenario including a 65pc crash in commercial property values, a double-dip recession and losses of 70pc on the toxic loans Anglo has to transfer to the National Assets Management Agency (NAMA).

The "likely" case only includes a 67pc loss on those Nama-bound loans, which will all be transferred over to the State's bad bank by the end of October.

"You could be looking at a reduction of that €34bn number at that point (October), if the discount comes in lower than the 70pc," said one source.

The cost of Anglo's bailout could also fall if the Government does a deal on the €2.5bn of risky debt that Anglo is due to repay to bondholders by 2017.

Finance Minister Brian Lenihan yesterday confirmed that the Government was drawing up legislation that would force those bondholders to share the "pain", though he declined to be drawn on how much could be saved.

He insisted, however, that there was no prospect of inflicting any pain on a bigger group of less-risky debt holders since doing so would damage Ireland's chances of raising credit.

Yesterday's figures also suggest that the decision to axe Anglo's "good bank" has reduced Anglo's immediate capital needs by more than €2bn.

Anglo's management had said the "good bank", which would have held Anglo's performing loans and done some new lending, would have needed between €2bn and €3bn.

Capital

The savings bank that is being set up in its place only needs €250m in capital, the Financial Regulator said yesterday.

The Regulator's figures show Anglo will need €29bn in state support under the "most likely scenario", and €34bn under the worst case considered.

Both figures are higher than the Government's estimates, largely because of the deeper-than-expected losses on Anglo's €36bn of NAMA-bound loans.

NAMA is now fast-tracking the remainder of its Anglo work so there can be certainty on those losses by the end of October -- but the eventual loss on the rest of Anglo's portfolio won't actually be known for many years.

Mr Lenihan yesterday said the Regulator had "erred on the side of caution" for the Anglo figures, adding that the Government was as certain as it could reasonably be on the final cost.

Irish Independent

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