Sunday 22 April 2018

Government to start talks on Anglo, Irish Nationwide

Anglo Irish Bank and Irish Nationwide Building Society will start talks with government officials this week to decide which parts of the state-controlled lenders may be merged following the country’s bailout, two people with knowledge of the discussions said.

Anglo Irish Chief Executive Officer Mike Aynsley met with Gerry McGinn, his counterpart at Irish Nationwide, to start exploring options last week, said the people, who declined to be identified because the talks are private. The Government has told both companies to devise a plan by the end of January, said the people.

The talks mark the Government’s first step to meeting the pledge it made to shrink the country’s banking industry when it accepted an €85bn international aid package for the country.

Finance Minister Brian Lenihan estimated on September 30 the cost of rescuing both lenders could be as much as €39.7bn.

“Merging the remaining businesses makes sense from an operational point of view as it pools resources and can generate some cost efficiencies,” said Stephen Lyons, an analyst at Dublin-based securities firm Davy. “It’s not going to make much of a dent into the billions that it is costing to rescue them.”

The Government might merge a unit of Irish Nationwide that oversees loans being transferring to the National Asset Management Agency with a similar division at Anglo, which the Government nationalised in 2009, said one of the people.

Irish Nationwide has about €500m of commercial property loans that may also be combined with Anglo, the person added.

‘Swiftly completed’

Irish Nationwide will also review options for its residential mortgage unit, which has about €2bn of loans and continues to extend new credit, one of the people said.

Officials at Irish Nationwide, Anglo Irish, the Department of Finance and the National Treasury Management Agency, which is representing the Government in talks with the banks, declined to comment.

The restructuring of both banks “will be swiftly completed and submitted for EU state-aid approval,” the Government said November 28 as it announced the country’s bailout.

Anglo will cease to exist in name within months as the lender is wound down over a number of years, the Central Bank said November 29.

Anglo Irish Chairman Alan Dukes said November 30 it is “conceivable” that the lender’s assets will be merged with those of Irish Nationwide as their restructuring is completed.

Central Bank Governor Patrick Honohan said November 29 that the deposits of both lenders will be transferred to other lenders. That may leave the lenders dependent on funding from the European Central Bank and Ireland’s Central Bank, Lyons said.

“The question of funding of both institutions hasn’t been clarified,” said Lyons. “They would have combined funding needs of at least €60bn, and it’s hard to see that coming from anywhere other than Ireland’s Central Bank or the ECB.”


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