LARGEST LOSS IN CORPORATE HISTORY
Anglo Irish Bank wants to draw a line under its past when its annual results are published next month, according to a front page article in The Sunday Times. You can readily see why. The nationalised bank is the functioning definition of a basket case. Anglo is about to announce the largest loss in Irish corporate history when it writes off €11.2 billion on loans that it will transfer to the National Asset Management Agency (Nama).The loan losses are substantially higher than anticipated and could mean the taxpayer will have to put billions more than expected into Anglo. In fact, the scale of the losses could also seriously affect plans by Ireland’s two stock market-quoted banks, Allied Irish (AIB) and Bank of Ireland (BOI), to raise money privately.
Anglo has already received €4 billion in capital from the State and earlier this year, it indicated that it might require a further €6 billion. The scale of the loan write-offs means that it could need even more. The capital requirements of Anglo Irish must be met by the taxpayer as it is 100 per cent owned by the State.
The bank is finalising plans to pass €32 billion of loans into Nama – up from an estimated €28 billion last September. Anglo is also preparing to take large losses on loans that will remain with the bank, a portfolio with a face value of €18-€20 billion. The Times article suggested that the losses are being inflated by the more realistic valuations being placed on commercial property by Anglo’s new management team.
And if you are thinking that it couldn’t get much worse for Anglo Irish, well, you are wrong. The bank is currently under investigation by the Garda Fraud Squad, the Office of the Director of Corporate Enforcement and the Financial Regulator.