Anglo reports record €12.7bn loss
Anglo Irish Bank posted a record loss of €12.7bn in the 15 months through December, after setting aside €15.1bn for toxic property loans.
Anglo, nationalised in 2009, may need €18.3bn in new capital to prevent the obliteration of what was once the country’s third-biggest lender, Finance Minister Brian Lenihan said.
Added to €4bn pumped in by the Government last year, that would take the bailout cost to €22.3bn, equivalent to about 14pc of the economy.
Anglo bankrolled many of the property developers behind the construction boom that drove Irish economic growth to an average 6pc annually in the first half of the decade.
In a fall from grace mirroring that of the economy, the Government seized control of the bank in January 2009 as property prices plunged. The loss is the biggest in Irish corporate history.
Management is working with the finance ministry on a plan to “significantly restructure the bank’s balance sheet, risk profile and culture in order to restore viability,” Anglo said in a statement today.
Winding down the bank now would cost more than €30bn, Lenihan said yesterday in the Dail.
The bailout comes as the country grapples with a budget deficit that reached 11.7pc of gross domestic product last year.
The premium investors charge to hold Irish 10-year debt over the German equivalent was at 138 basis points today compared with 284 basis points in March 2009, a 16-year high.
“The cost of cleaning up Anglo may add €20bn to Government debt over 10 to 15 years,” said Rossa White, chief economist at Dublin broker Davy.
“It’s unprecedented, but manageable.”
The National Asset Management Agency (NAMA) will pay a discount of 50pc on the first block of loans it is taking from Anglo as part of a plan to clean up the ailing financial industry. The loans were originally valued at €10bn.
Lenihan said 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.
“Only the taxpayer can provide that capital,” Lenihan said. “It is the least worst option.”
The European Commission, the European Union’s executive arm, today approved the recapitalisation of Anglo and opened an investigation into the bank’s restructuring.