MIKE AYNSLEY says his ultimate aim as chief executive of State-owned Anglo Irish Bank is to recover as much money as he can for the State over time from what is currently a zombie bank that has stopped lending to new customers and needs a further State bailout.

The Australian banker is just seven months into the job and is preparing to report the largest loss in Irish corporate history next week when Anglo posts pretax losses of almost €12 billion after writing off loans of €14 billion.

“The numbers you have seen bandied around the press – they are probably not too far from it,” he said in his first interview since taking up the job at the bank.

In his short time at Anglo, Mr Aynsley has removed the old management team and installed a new one comprising five external candidates, many of whom worked with him at National Australia Bank.

He has launched legal proceedings against his predecessor David Drumm and the bank’s former chairman Seán FitzPatrick to recover unpaid loans of €8.3 million and €70 million respectively.

He has introduced a voluntary redundancy plan under which 290 staff left the bank, in excess of the 230 job cuts first sought, he said.

Now Anglo is preparing to take a further Government payout to fill the substantial hole in the bank’s capital left by the losses.

Mr Aynsley goes to considerable lengths to explain why keeping the bank open is the only viable option, despite the bank estimating the cost of this option to the State at €6 billion to €9 billion on top of the €4 billion invested last year.

“As the least worst option, it is something that, distasteful as it may be to some people who are tied to this Anglo stigma, they need to get on board with. It is a really difficult thing and it is one of my biggest concerns – how do I get people on board with the least worst option which is in essence the best option?”

The alternatives are “horrific” given the capital cost involved and “extremely expensive from a funding perspective”, he said.

Liquidating Anglo would cost between €27 billion and €35 billion, while running the bank down over 10 years would cost between €18 billion and €22 billion, he said.

Either alternative would also increase the borrowing costs of the Government and the other banks as the State would have to fund the bank’s €90 billion balance sheet, he said, as the depositors would withdraw their money in a wind-down or liquidation.

If Anglo were liquidated, all deposits would have to be repaid and loans refinanced by other banks or sold in fire-sales or over time at wind-down prices, he said.

Given how foreign banks were withdrawing from Ireland, this would concentrate the risky loans at AIB and Bank of Ireland.

The Government would also have to provide up to €22 billion in funding that Anglo would have received in bonds from Nama.

Anglo costed all the options with accountants KPMG, investment bank JP Morgan and consultants Bain Co, which advised on the restructuring of UK bank Northern Rock after its bailout.

Weighing up the options, the bank has asked the European Commission to approve a restructuring plan that will see Mr Aynsley split Anglo into a good and bad bank after €35.6 billion in loans – half the bank’s overall loan book – are transferred to the Nama.

Mr Aynsley said he was “hopeful” that Brussels would approve the plan by the end of June. The bank would submit an updated restructuring plan to the commission by the end of next month, he said. He plans to separate Anglo legally and financially later this year before both the good and bad parts can operate as stand-alone entities from 2012.

He believes that the good part of the bank can be reinvented as a business lender and sold off, merged with another bank or refloated on the market over time.

On the losses facing Anglo this weekend when Nama starts buying loans, he said that a discount of 35 per cent on all its Nama-bound loans would leave losses of €12.5 billion, but he didn’t know what “haircut” the agency would apply. It could be 40 per cent, he said.

Mr Aynsley said he understood why the public was angry that the State was having to bail out a bank that largely financed developers and property speculators and that is not currently helping either small businesses or households.

Responding to Fine Gael’s figures last week that the Anglo bailout would cost every Irish family €12,500, Mr Aynsley queried the party’s proposal to hand the bank over to its creditors so they can recover what they can.

“Instead of €12,500 per family would you rather that it costs €30,000 per family?” he said. “It is not an exercise in pretending these issues will go away because markets will recover.”

A 32-year veteran of banking in Australia, Asia and Europe, Mr Aynsley said he has never come across the issues discovered at Anglo before in his career.

“It was a very shocking situation to walk into. I won’t attempt in any way shape or form to make excuses for some of the behaviour that seemed to have gone on,” he said. “It seems to have been more an organisation that has gone from zero to €100 billion at light speed and back-filled around finance control and risk functions on the way.”

He defended Anglo’s decision to pay salary increases to 70 staff out of the remaining 1,240 at the bank but declined to say how big the pay increases were. They were made to people who received promotions or had increased workloads following the departure of 550 staff over the past 18 months.

The bank had cut staff costs from €160 million in 2008 to a projected figure of €116 million this year, while the salaries of senior management had been reduced to €3.2 million from €6.8 million.

Staff costs would be down 27 per cent this year on September 2008 figures, while employees were down 31 per cent.

Mr Aynsley said Anglo would be “as hard-nosed as we need to be” in recovering its loans “whether they are from ex-directors, ex-staff or current dysfunctional clients”.

He wants the various inquiries at Anglo, including the Garda investigation, wrapped up soon. “Sort of like the public wants the organisation to be gone, I want the legacy issues to be finished and gone, and the investigations over and done with. But realistically that is going to take time,” he said.