SENIOR MANAGEMENT at Irish Bank Resolution Corporation, formerly Anglo Irish Bank, are hopeful that it could return up to €8 billion to the State once it has run down the former Anglo and Irish Nationwide loan books.
The bank told the Oireachtas finance committee that the final cost of Anglo to the State could be “closer to €25 billion”, which is lower than the previous €29 billion to €34 billion estimated in September 2010.
Management at the bank said there could be a €4 billion saving on the original estimated cost and a further €4 billion returned to the State that the bank must hold for regulatory purposes.
Alan Dukes, the chairman of IBRC, told the Oireachtas committee the bank was “reasonably hopeful” the final cost could be about €25 billion and the bank could be wound up before the target end-date in 2020, but he declined to say when.
The lower cost was “highly contingent” on a number of factors: what happens to property markets in Ireland and the UK; the economy; the euro zone crisis; and the restructuring of the promissory notes used by the State to spread the cost of Anglo out. Bearing these in mind, Mr Dukes said the bank believed it has “reduced the expected final cost of the operation to the taxpayer by an appreciable amount”.
He said, however, that he would not be confident enough to say that the property market had reached the bottom of the cycle.
Mike Aynsley, chief executive of IBRC, told the Oireachtas Committee on Finance, Public Expenditure and Reform that the bank could run itself down more quickly but that could increase the cost. Mr Aynsley said the bank’s net loan book of €15 billion – after taking almost €11 billion to cover bad debts – could more than halve by 2015 and the nationalised bank hoped to have exited the UK market fully by the end of 2014.
Richard Woodhouse, IBRC’s head of specialised asset management, said it was selling about €100 million of assets a month.
Mr Dukes told the committee that if the maturity or interest paid to the bank on the promissory notes were changed, it could affect the interest accruing to the bank and the final cost of the lender.
The bank was not involved in talks between the Government and EU authorities on the restructuring of the Anglo debts, he said.
IBRC was losing staff at an “unacceptable rate” as they were being head-hunted by other banks just when they had been trained to the point where they were about to be promoted, he said. He hoped the Department of Finance review on bankers’ pay would allow IBRC to award pay increases to prevent it from losing staff to other banks.
Mr Aynsley said the bank was looking at the most distressed loans in the former Irish Nationwide mortgage book “to develop a different series of products” but that it did not offer mortgage forgiveness. “We have inherited probably the worst residential book in the Irish marketplace,” he said of the €1.9 billion of Irish Nationwide residential mortgages.
Mr Dukes said he agreed with the recent comments of Central Bank regulator Fiona Muldoon that “decisive and creative” action was required by the banks to tackle the mortgage crisis, but the real test was not in launching products but ensuring “that the solutions actually work”. The bank was looking at going beyond these products for customers in the greatest difficulty to relieve the burden of debt on consumers to stimulate a recovery in the economy, said Mr Dukes.
Mr Aynsley said that seeking the controversial €1 million bonus paid to former Irish Nationwide chief executive Michael Fingleton was still being actively pursued.
