IRISH BANK Resolution Corporation, formerly Anglo Irish Bank, is on target to cover its estimated cost to the State of between €25 billion and €28 billion and to be run down before 2020, the bank said, despite losing a further €743 million in the first half of the year.
Mike Aynsley, chief executive of the State-owned bank, would not give a more specific number on what the final cost of the former Anglo would be, but said it would still be within his estimated range.
This was despite commercial property values falling 70 per cent from peak, worse than an earlier expected fall of 60-65 per cent.
“I am not going to come out and give you a new number but I would say that we are certainly on target,” Mr Aynsley told The Irish Times. “We have deleveraged our balance sheet more substantially and we are on target for a wind-down prior to 2020.”
IBRC would run itself down more quickly if it could find buyers for its remaining loans, almost all of which are in Ireland and the UK, but there were few or no buyers for those assets, he said.
“If you go too fast, you just burn capital,” said Mr Aynsley.
The State has committed €29.3 billion for Anglo and €5.4 billion for Irish Nationwide, which is also being wound down by IBRC. “In the absence of markets being friendly, the attitude of the bank is we will not sacrifice capital,” he said, adding that IBRC would run itself down loan by loan rather than by selling a large portfolio as it did with the sale of the bank’s US loan book last year.
IBRC was focusing this year on reducing costs and improving loan management so it can take advantage of opportunities opening in the market to sell assets, he said.
The first-half loss widened from €105 million as IBRC set aside a further €1.1 billion to cover bad debts on its remaining loan book of €27.1 billion. The bank has taken total provisions of €10.8 billion for bad debts on these loans.
Almost €8 billion of impairment provisions were taken against €18.3 billion of Irish loans. Impaired loans stood at 65 per cent of loans in June, up from 61 per cent six months earlier.
Excluding the 256 staff who work in the unit dealing with Anglo and Irish Nationwide loans transferred to the National Asset Management Agency, IBRC has 775 staff. Mr Aynsley said this would fall further by year end but he declined to say by how much.
Operating expenses fell 18 per cent to €129 million in the first half on the same period in 2011.
IBRC made net interest income of €538 million in the first six months, much of which came from €769 million interest income paid by the State on coupon on promissory notes. IBRC pays part of this income in interest to the Central Bank for emergency loans to fund the run-down of the bank.
Funding from central banks and monetary authorities stood at €42.3 billion at the end of June, or 89 per cent of the bank’s funding.
Mr Aynsley said IBRC sees “a lot of merit” in being used as the vehicle to take on unprofitable or soured loans to clean up the other Irish banks, while some outside IBRC have questioned why “the old Anglo” would be used for this.
“You have got the traditional ‘well why would you do that with the old Anglo’ and those types of arguments. They want to get any remnant of the old Anglo off the landscape in totality,” he said.
He had no comment on the prospects of the Government securing a deal in Europe to reduce the burden of bank debt.
