The €7.2bn transactions between Anglo Irish Bank and Irish Life and Permanent in September 2008 were for "optical benefit only" and created no new cash, a jury has been told.

Ciaran Cunningham, former treasury manager at Anglo was continuing his evidence on day 34 of David Drumm's conspiracy to defraud trial at Dublin Circuit Criminal Court.

The former chief executive of the bank accepts that in 2008 transactions worth € took place between Anglo and Irish Life and Permanent, but he disputes they were fraudulent or dishonest.

Mr Cunningham told Paul O'Higgins SC, prosecuting, that there was no commercial rationale to the transactions with ILP other than to present the numbers as customer deposits.

The witness agreed that when a transaction was netted it "would never show in the accounts at all."

Mr O'Higgins referred to the series of transactions between 25 and 30 September 2008 involving Anglo, IPL and Irish Life Assurance.

Mr Cunningham agreed that the amounts exchanged were identical in terms of size and interest rates and the only benefit to them was an optical one.

He said the "cash neutral" transactions generated no new funding.

The jury was shown Anglo's balance sheet for 22 September 2008 which showed that the customer loan to deposit ratio was 145%, or 165% excluding initiatives.

Mr Cunningham said that at that point the customer initiatives were recorded as €6bn, but would later amount to €7.2bn.

The court heard that Anglo's balance sheet recorded Bank of Ireland's ratio as 157% and Allied Irish Bank as 153%.

Of a list of seven banks named on the sheet, only Lloyds' Bank's ratio of 142% was better than Anglo's.

In an email to John Bowe on 23 September Mr Cunningham said he had "no problem" including the €6bn figure in the document he was drafting for Mr Bowe to present to the board.

The jury also viewed an email sent by Mr Cunningham to his boss in which he said there were "too many moving parts to the balance sheet today."

In this email, Mr Cunningham said the trade would be done in interbank rather than repo format.

Mr Cunningham told the jury that he prepared a balance sheet analysis for the year end, showing customer deposits at €51bn, and a loan to deposit ratio of 143%. Mr O'Higgins asked if the ILP transactions were "actually settled gross".

"They were not," Mr Cunningham replied.

He said they were initially settled gross but that on maturity the cash flows were settled net, adding that he only became aware of this in February 2009.

During cross-examination by Bernard Condron SC, Mr Cunningham said he believed the transactions were gross "all along" but when they were "undone" they were settled net.

He said he told gardaí that he believed the possibility of doing a repo with ILP was still being considered in August and September 2008.

Mr Cunningham said he included a reference to the ILP customer deposits in a document he prepared for the bank's audit committee meeting on 18 November 2008 "because of their size."

Mr Drumm, with an address in Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo by "dishonestly" creating the impression that deposits in 2008 were €7.2bn larger than they were.

He has also pleaded not guilty to false accounting on 3 December 2008, by furnishing information to the market that Anglo's 2008 deposits were €7.2bn larger than they were.

The trial, now in its fifth week, continues before Judge Karen O'Connor and a jury of ten men and four women.