Bank's bailout may be lower than estimate, says Aynsley

ANGLO IRISH Bank chief executive Mike Aynsley said yesterday that the final cost of bailing out the nationalised lender could be between €25 and €28 billion – lower than previous estimates.

The Central Bank had previously said the cost of bailing out Anglo could rise to € 34 billion under its worst-case stress-test scenario.

Speaking at the publication of the bank’s first-half results, Mr Aynsley said that the latest projections may leave the lender with a capital surplus which would be ultimately handed back to the State after the bank is wound down.

The removal of the “stress risk”associated with Anglo’s US loans, once the US loan book is sold off, is one reason why the final cost may be lower, he said.

Anglo Irish Bank yesterday reported pretax losses of €101 million for the first half of the year, a fraction of the €8.2 billion loss it posted in the first six months of 2010.

The bank made an operating profit for the period of €332 million before disposals and provisions for impairment.

The pretax losses included a €214 million loss on the transfer of the bank’s deposit book to AIB in February plus impairment charges of €778 million. However, these losses were offset by a € 601 million net reduction in the loss reported on the transfer of assets to Nama, after full due diligence was completed.

Anglo’s head of corporate development Tom Hunersen said yesterday that the sale of the company’s US loan book should be completed by the end of the year, though further details would not be disclosed for up to a month.

Some of America’s biggest banks, including JP Morgan and Wells Fargo, are understood to have bid for the $9.4 billion loan-book.

Mr Hunersen said it was “well-bid”, adding that it was a complex process due to the number and complexity of the loans involved.

On the question of imposing burden-sharing on senior bondholders, Mr Aynsley said it was an issue for Government.

“It is not really going to impact us at Anglo. The question is how it will impact on the rest of the banking system.”

Minister for Finance Michael Noonan caused consternation in market circles in June when he said the Government may consider imposing losses on senior bondholders.

Anglo has €750 million of senior unsecured unguaranteed bonds due for repayment on November 2nd. In total, Irish Nationwide and Anglo have about €3.8 billion in senior unsecured unguaranteed debt.

Mr Aynsley said yesterday that the reduction in the size of Anglo’s balance sheet meant that it was no longer the “systemic risk” to the Irish banking system that it once was.

Anglo’s balance sheet reduced from €94 billion in December 2008 to €54 billion including capital injections at the end of June.

“When you look at the structure and size of the balance sheet, it is no longer a systemic issue.”

Mr Aynsley also confirmed that about 20 staff have recently left Anglo’s loan recovery unit.