Huge Anglo loss as deposits sale backed

Tuesday 08 February 2011 18.43
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Anglo Irish Bank - Signals €17.6 billion loss
Anglo Irish Bank - Signals €17.6 billion loss
Court orders - NTMA can start auction process for Anglo and INBS deposits
Court orders - NTMA can start auction process for Anglo and INBS deposits

The High Court has directed that an auction of the deposits and corresponding assets of Anglo Irish Bank and Irish Nationwide Building Society can take place immediately.

The move follows an application by the Minister for Finance to the court and is the first step in the winding down of the two institutions.

The winding down of the institutions and the transfer of their deposits is required as part of the agreement between the State and the EU and IMF.

Meanwhile, Anglo Irish Bank expects to report a €17.6 billion loss for last year.

Read the Department of Finance's explanation of the move here

Many of the financial details involved in today's court application were kept confidential on the basis that they are commercially sensitive. The fact that this application was being made could not be reported until Mr Justice Brian McGovern had made his order. This was to prevent the application from triggering default clauses in certain bonds.

The court was told that the transfer of parts of the business of the banks might be said to be a cessation of business under the terms of the bonds but the judge's order overrides that possibility. Lawyers for RTE and the Irish Times were in court.

Senior Counsel Bryan Murray for the Minister said the application was to enable the re-organisation of the institutions and was essential to ensure their stability. It was also required as a condition of the EU and IMF programme of support, he said.

He said the external financial authorities were pressing very heavily for this transfer to take place as quickly as possible. He said Anglo and Irish Nationwide were continuing to act as destabilising forces in the financial system. Mr Murray said it was very important this was dealt with as quickly as possible.

The auction of deposits was an attempt to preserve the financial position of the institutions by minimising losses in the future. He said plans were in place to mitigate possible risks with this auction raised by the Governor of the Central Bank. These risks were not disclosed in court.

The agreement with the EU and IMF also involves Anglo formulating a detailed plan for the rationalisation, including the possible closure ,of Anglo's offices in the UK and its branches in Vienna, Dusseldorf and Jersey and giving it to the NTMA no later than March 31.

The court was told that both Anglo and Irish Nationwide were consenting to the directions order. It was intended to combine both institutions into a single bank which would be 100% Government owned, and this auction of deposits and assets at book value had to take place before such a merger.

The judge made the order and said that because this was a matter of exceptional public importance, redacted versions of the sworn documents and order should be made available to the media as soon as possible.

The Department of Finance said no action needed to be taken by depositors following the court's action, adding that depositors in both institutions remained 'fully secure'.

Anglo set for €17.6 billion 2010 loss

Anglo Irish Bank says it is expecting to report a loss of €17.6 billion for 2010. In a trading update, the bank said this would include a loss of €11.5 billion on assets transferred to the National Asset Management Agency and €7.8 billion set aside to cover other loan losses.

The 2010 loss would set a new record for an Irish company, beating the €12.7 billion Anglo recorded for 2009.

The bank also said deposits had dropped from €27.2 billion at the end of 2009 to just over €11 billion at the end of last year. Borrowing from the ECB and Irish Central Bank almost doubled to €45 billion.

The nationalised bank expects to transfer another €1.1 billion of loans to NAMA. It said it had received State support of €29.3 billion over the past two years.

Anglo said it employed just under 1,300 people at the end of 2010, down 16% from a year earlier.

When the loan losses are excluded, the nationalised bank made an operating profit of €1.8 billion, mainly due to a buyback of some of its subordinated bonds.