Monday 19 March 2018

Three-quarters of Anglo transfers to NAMA 'in trouble'

Brendan McDonagh is the chief executive of the toxic loans agency
Brendan McDonagh is the chief executive of the toxic loans agency

Joe Brennan

ALMOST three-quarters of the €35.6bn of loans that Anglo Irish Bank is dumping in the National Asset Management Agency (NAMA) are classified by the embattled bank as being in trouble.

Anglo is set to transfer half of its €72bn loan book in NAMA by the end of this year, making it by far the biggest participant in the State's 'bad bank'.

The group's annual report, unveiled this week, shows that more than 70pc of the €35.6bn of risky property and construction loans it is moving to NAMA are classified as 'impaired'.

This means that loan repayments are well in arrears, or the value of the assets used as security has collapsed -- or both.

Anglo has already put aside €10.1bn to cover bad-loan losses on its NAMA loans. But it could end up having to raise this to €17.8bn, if the 50pc discount that Brendan McDonagh, managing director of the bad bank, has slapped on its first batch of loans also applies to the rest.

The rising bill for bailing out Anglo has also been driven by demands from the new head of the financial regulator, Matthew Elderfield, that all Irish banks hold a much higher amount of cash in reserve to cushion themselves from another economic shock.

Turning to Anglo's €36.5bn of non-NAMA loans, the annual report shows that more than a quarter of these are 'impaired'. A further 13pc are classified as being in arrears, but not impaired.

The remaining €22.2bn -- or more than 60pc -- of loans not going into NAMA are performing alright.

The group has set aside €4.8bn of provisions for its non-NAMA portfolio, which the new management team, led by Australian Mike Aynsley, is looking to split into a 'good' and 'bad' bank under a massive restructuring plan which is being examined by the European Commission.

The plan envisages winding down the 'bad' element, which would essentially be an asset management company, over the space of up to a decade. The 'good' bank would be turned into a business lender, which the management team and the Government hope would gradually claw back some of the estimated €22bn that will end up being pumped into the group.

"If you do anything short of having an operating bank at the end of this is the equivalent to putting money into a vortex that you will never ever get back," Mr Aynsley told the Irish Independent.

Irish Independent

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