Wednesday 22 November 2017

Number crunchers to reveal cavernous loan book

Joe Brennan

THE scale of toxicity in the bank that 'Seanie' FitzPatrick built will be laid bare next week when Anglo Irish Bank reveals it has written down more than a fifth of its entire €70bn-plus loan book in the space of two years.

Anglo is set to announce bad loan losses of close to €14bn for the 15 months to the end of December, on top of €750m in loan losses for the previous year.

The shocking figure is mainly due to the National Asset Management Agency (NAMA) discounts that Anglo faces on up to €35bn of risky property loans it is transferring to the State's 'bad bank'.

The sheer size of the bad loan losses shows just how inadequate three separate 'root-and-branch' reviews of the Anglo loan book have been.

An apparently exhaustive trawl by former finance director Willie McAteer months after the state guarantee was introduced pointed to a maximum of €2.76bn of loans being written off over three years.

Government-appointed consultants PricewaterhouseCoopers predicted a loss of up to €6bn over two years.

Forecasts

Then Anglo itself revealed last May that it could face losses of €7.5bn over three years -- but that it could rise to €11bn in a worst-case scenario.

All three forecasts have proved hopelessly optimistic.

Next week's figures are likely to re-ignite calls for the entire bank to be closed down immediately -- especially when it will need up to an additional €6bn in taxpayers' money to stay afloat.

Anglo has already received €4bn from the taxpayer.

But the team parachuted in to overhaul the bank, led by Australian Mike Aynsley, hopes to split it into a 'bad' and 'good' bank in an effort to minimise the cost to the Exchequer.

Of course, a large part of the business will be dumped in the internal 'bad bank', which will end up being wound down over the next decade.

Those familiar with costing of various options for the bank say that it would cost between €20bn to €30bn to wind down the entire bank over a five- to 10-year period.

A central part of the rescue plan is to put Anglo's depositors in the 'good bank' and transfer its riskier bondholders into the 'bad bank' and make them absorb a large amount of the losses coming down the tracks.

Irish Independent

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