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The State-owned Anglo Irish Bank is
expected today to report a huge loss for the first half (H1) of
2010 -- even bigger than the six-month deficit of
€4.1bn reported last year.
The loss will be the biggest in Irish corporate history and will
include the first €9.25bn in loans sold to the National Asset
Management Agency (NAMA) and additional losses on other loans
and investments.
Because of inadequate collateral
and dodgy paperwork, the first NAMA loans were subject to a 55%
discount, resulting in a loss of €5.1bn. In early August, the
second set of transfers of €6.75bn resulted in a 62% discount
and a €4.2bn loss, which is likely to be provided for in the H1
2010 results.
Anglo has a further €19bn in
loans to transfer to NAMA.
Last March, the former builders'
bank announced a loss of €12.7bn for the 15-month period to the
end of 2009 after writing off €15.1bn on loans and investments.
It had previously announced a loss of €4.1bn for the six months
to the end of March 2009.
The State has already provided
€14.3bn in capital to Anglo and a further €10bn has been
approved by the European Commission.
While Central Bank governor
Patrick Honohan has publicly said the Anglo bailout will not
exceed €25bn, last week credit ratings agency Standard & Poor’s
estimated a cost at €35bn.
The total Anglo non-NAMA loan
book before provisions is €36.5bn.
The ultimate cost of a wind-down
could exceed €40bn.
Uncertainty about the cost of the banking rescue
is continuing to create waves in the bond markets.
Although the yield on Irish 10-year bonds is
below last May’s highs, at 5.7%, the fall in German benchmark bond yields again
resulted in the spread to widen on Monday to 352 basis points (3.52%) - - the
most since at least 1991.
Ten-year yields on German bunds, fell by 6 basis
points to 2.14%.
Anglo Irish Bank closed at 22 euro cent on the Irish Stock Exchange, on
its last day of trading before becoming a State-owned bank.
On February 21, 2007, the ISEQ index rose to an-all time high of 10,041
and the Financial sub-index rose to 18,098. Bank of Ireland closed at
€18.65; Anglo Irish closed at €16.64 and AIB closed unchanged at €23.95.
A year later, on February 21, 2008, AIB closed at €13.80, Anglo Irish
Bank finished at €8.84, while Irish Life & Permanent closed at €10.20
and Bank of Ireland traded at €9.50.
Seven issues dominate the Irish market and in recent years, overseas
residents, dominated by institutions, have owned more than 60% of Irish
bank shares. Ireland's biggest company CRH, accounts for about a third
of Irish market capitalisation and in December 2007, foreign holders
held 84% of the issued shares.
