Anglo Irish loaned €255m to directors last year

Anglo Irish Bank issued loans to directors of €255 million last year, with €179 million of this outstanding by the end of September, according to the bank’s annual report published today.

Overall remuneration to the twelve directors at Anglo Irish totalled €9.5 million last year despite no bonuses being paid.

Anglo Irish chairman Donal O’Connor said while no loans to directors were impaired “it is likely there will be an impairment provision in the six months to 31st of March 2009, in respect of these loans”.

Of the €255 million in loans extended to directors, €83.3 million was to former chairman Sean FitzPatrick. The annual report notes that in 2007 Mr Fitzpatrick had €122 million in loans from the bank, including a joint loan of €9 million with a former director.

It does not breakdown the remaining directors loans. Among the borrowings extended to a former director last year was an €8 million loan secured against shares in the bank.

As of February 19th this year loans outstanding to directors remaining with the bank totalled €5 million.

He said following the collapse of Lehman Brothers in mid September 2008 the bank had experienced “substantial outflows” in the weeks leading up to the introduction of the Government guarantee on September 30th, 2008.

Mr O’Connor said retail deposits grew after the guarantee was introduced but said: “The reputational damage to the bank resulting from a number of recent disclosures together with adverse ratings actions have significantly weakened the bank’s competitive funding position at a time when global markets continue to deteriorate and overall sentiment is negative.”

As of September 30th, the bank had a reported profit of €784 million and total assets of €101 billion.

The bank said1.3 per cent of its loan book, loans worth €732 million, were impaired, compared with 0.14 per cent of impaired loans at the end of 2007. Of this €377 related to commercial loans and €276 million to residential issues.

The bank added that it has commercial loans of €1.02 billion on which repayments were more than 30 days overdue and, of this, loans worth over €605 million which are three months overdue. These loans are not deemed impaired.

Among the losses incurred by Anglo last year some €32 million of an €84 million investment linked to subprime mortgages in the US, while €44 million related to Structured Investment Vehicles was also written off.

The bank also wrote-off €4 million arising from the collapse of Washington Mutual and Lehman Brothers. The bank’s auditors Ernst & Young were paid €2.2 million last year, some €400,000 more than in 2007.

At the end of September last year the bank’s core tier I capital ratio was 5.9 per cent.

The annual report showed former chief executive David Drumm, who resigned in December, was paid more than €2 million in the year to the end of September last, down from €3.2 million the previous year.

Former chairman Sean FitzPatrick was paid almost €540,000 for the same period. Tom Browne, a former executive director, who retired in November 2007, received €3.9 million, including a 3.75 million one-off payment in recognition of its contribution to the group.

Mr O’Connor said Anglo was determined to emerge from its current difficulties as a strong and viable finance house that taxpayers can be proud of.

He said the bank has put off the appointment of a new chief executive until a new business plan and a number of reviews being conducted by the board are complete. In the meantime, Mr O'Connor will act as executive chairman.

“Most importantly, we will strive to conduct all our business to the highest ethical and corporate governance standards. This is key to rebuilding trust and confidence in Anglo Irish Bank,” he said.

Appearing to rule out any immediate job cuts, the executive chairman added: “The board has great faith in the ability and strength of our people and they will play a critical role in ensuring the future viability of the bank.”

The bank said fees for non-executive directors of the bank have been cut by 20 per cent from January 1st, this year.