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News : International Last Updated: Apr 1, 2011 - 8:12 AM


Markets News Thursday: Anglo Irish Bank reports loss of €17.7bn in 2010 - - greatest in Irish corporate history
By Finfacts Team
Mar 31, 2011 - 8:47 AM

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Anglo Irish Bank: The nationalised former builders' bank today reported a loss of €17.7bn  in 2010 - - the greatest in Irish corporate history and equivalent to about 50% of annual Irish tax revenues.

So far, the state has injected €29.3bn in the defunct bank that is in a wind down process.

Total liabilities at 31 December 2010 were €68.6bn, down from €81.0bn at 31 December 2009. Customer deposits declined from €27.2bn at 31 December 2009 to €11.1bn at 31 December 2010.

Borrowings from banks increased to €46.6bn at 31 December 2010 and include €45.0bn from central banks compared with €23.7bn at 31 December 2009. Debt securities in issue at 31 December 2010 were €6.9bn compared with €15.1bn at 31 December 2009.

At 31 December 2010 euro denominated borrowings from central banks totalled €45.0bn, and include €28.1bn borrowed under special liquidity facilities. Total borrowings from central banks are up from €26.3bn at 30 June 2010.

Headcount at 31 December 2010 was 1,296 representing a decrease of 16% over the year.

The key financial results for the year ended 31 December 2010 are as follows:

  • Loss for the year of €17.7bn, which includes impairment charges of €7.8bn and a loss of €11.5bn on disposal of eligible assets to NAMA;

  • Impairment/bad debt charges include €2.6bn relating to NAMA (State toxic property loans agency) loans;

  • Operating profit before impairment and loss on disposals to NAMA of €1.8bn, due mostly to the liability management exercise, relating to subordinated bonds, conducted towards the end of 2010;

  • Effective 31 December 2010 the bank received an increase to the promissory note of €6.42bn, bringing total capital support over the past two years to €29.3bn;

  • Core Tier 1 and Total regulatory capital at year end 2010 of €4.0bn and €4.6bn respectively, with risk weighted assets of €36.7bn;

  • At 31 December 2010 the bank expected to transfer a further €1.1bn of nominal loan assets to NAMA;

  • Following the completion of loan asset transfers to NAMA, nominal customer loans will be approximately €35.8bn with cumulative specific provisions at 31 December 2010 of €8.8bn.

Annual Report 2010 (pdf)

Anglo Irish Bank closed at 22 euro cent on the Irish Stock Exchange, on its last day of trading - -Jan 16, 2009 - - 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.

Six 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 27% of Irish market capitalisation and foreign residents hold up to 90% of the issued shares.

Market awaits PCAR and PLAR announcements: Davy economist, Conall Mac Coille, comments - - "The market will be clearly focussed on the outcome of the Prudential Capital Assessment Review (PCAR) and Prudential Liquidity Assessment Review (PLAR) later this evening. We expect that capital requirements to be met by the Irish sovereign will lie somewhere in the range of €19.5-24.3bn, bearing in mind the €17.5bn of internal resources committed by the sovereign to the €35bn set aside for the banking system within the IMF/EU package.

We will also be looking for the targets announced in the PLAR to be implemented over a drawn out timeframe so that fire-sale losses can be avoided. Furthermore, it now seems likely that the short-term public support of the Irish banks will be replaced with a medium-term funding solution from the European Central Bank.

Today also sees the release of the Irish trade data for January following the surprise quarterly decline in Irish exports in Q4 announced in the national accounts. There is currently a large and unusual discrepancy between the monthly trade data and final quarterly national accounts export data. This discrepancy relates to a statistical adjustment applied only to the final quarterly data but not to the monthly data. So it will be very difficult to be confident of any signal regarding the strength of the export sector from the headline numbers in today's trade data.

In the UK, the Nationwide measure of house prices released this morning indicated that the annual rate of inflation rose 0.1% in March from -0.1% in February. This meant that house prices rose by 0.5% on the month. Clearly, the UK housing market has weakened, but recent data suggest that the low level of transactions continues to support prices. The GfK measure of UK consumer confidence released early this morning posted a reading of -28, flat on the month but following sharp falls through 2010 and remaining at a very low level."

From Anglo Irish Bank's Annual Report 2006

Economic View: Today’s stress tests to be more than just another line in the sand; Goodbody's chief economist, Dermot O’Leary, comments  -- "Given that we have had numerous so-called 'lines in the sand' drawn over the past twelve months in relation to the Irish banking sector, but to little avail in terms of solving the problems fully, what will make today’s announcement any different?

 We can think of a few important ones: (1) the tests have been completed by independent outside agencies whose reputation is on the line; (2) the tests are now being completed under the watchful eye of the IMF/EU/ECB, as they are a key condition set out in the agreement between the troika and the Irish Government last December; (3) there is intense pressure on Irish officials at European level to ensure the debacle of last year’s stress tests, where Ireland is partly blamed for the failure of the tests in Europe overall, is not repeated; (4) it appears that modelling for loan losses in mortgage books will be based on international experience of the biggest housing busts, with the media reporting that the example of Nevada is being used as a test case for possible losses on the Irish mortgage book despite the cultural and historical differences between defaults in the US and Ireland;

(5) funding is already in place to meet the capital shortfalls that will be announced given the €35bn that has been made available as part of the IMF/EU deal, with the €18bn-€23bn range originally leaked at the weekend seemingly sticking; (6) judging from media reports, today’s announcements will include a more widespread restructuring of the banking system (see Financials piece below for more details), with the possibility of forced mergers of institutions going well beyond the measures that have been taken to date; and (7) Finally, although not confirmed as yet, it is hoped that the efforts of the Irish authorities will be aided by additional liquidity support from the ECB. As we noted yesterday, the quid-pro-quo for this or any further ECB support may be a pledge by Irish officials not to take any action in terms of burden-sharing with senior bank-bondholders, but this may not be resolved in full later today. There is no doubt that the announcement due at 4.30pm will represent a significant watershed in this crisis.

Sudakshina Unnikrishnan, VP, commodities research at Barclays Capital explains why the bank recently raised its target price on crude oil. She also discusses agricultural commodities:

Irish Financials: Today is the day – PCAR 2011; Goodbody's Eamonn Hughes comments - - "The Central Bank, Minister for Finance and NTMA will all be putting us out of our misery this afternoon (from 4.30pm) when the results of the stress tests are finally revealed. The banks themselves are also likely to outline their reaction subsequently (so it will be busy night!). However, the media commentary this morning and overnight on the electronic media is putting some colour on the plans and fleshing out some of the expectations building in the market over the last few days.

Firstly, both AIB and BOI’s shares will be temporarily suspended today ahead of the announcements, following IL&P yesterday. The figures being bandied about now are up to €5bn for BOI and €3bn for IL&P. With the EBS indicated to be somewhere around the €1bn level, with presumably AIB holding out the balance if the €18-23bn emerging consensus range for the system holds. However, bear in mind that these figures include the PCAR targets from H210 which are still outstanding - €4.7bn in the case of AIB and €1.4-1.5bn for BOI. It also appears that more capital will be going into Anglo Irish and we note that €29bn has been committed with its worst case estimate at €34bn. Given the figures being mentioned, it’s hard to see either BOI or IL&P avoiding majority state ownership and AIB is already 93% owned. The coverage indicates that the PCAR impact has been harsh on mortgages with losses in the state of Nevada being used as a template!

It appears that IL&P is understood to be putting its life assurance operation up for sale, with the embedded value at €1.746bn at end December and a statutory NAV of €1.278bn. Presently, UK life assurers are trading on about 0.85x EV. It appears that IL&P will be given time to sell its life operation and also its 30% JV with Allianz (likely back to the latter) and that the final decision on the amount of capital that must be injected will be taken after that. Elsewhere, the State halted the sale of EBS yesterday to the Cardinal consortium and it now appears that EBS will be backed into AIB. Also, the indications are that BOI will also be given time to raise some of its capital target, which by inference means some of it will also be going in immediately.

Finally, it still appears that the €60bn medium term funding facility from the ECB to wean the banks off the ELA (domestic central bank funding) is outstanding, though the domestic authorities are hoping the ECB announces it today.

In terms on impact on valuations etc, there is still much that is outstanding, given the circularity around the impact of capital raises on valuations per share. However, we should be in a better position to comment tomorrow on what’s left."

JPMorgan Chase CEO Jamie Dimon discusses regulation and the government, municipal defaults, and what a failure to extend the U.S. debt limit would really mean:

US Markets

In New York Wednesday, the Dow rose 72 points or 0.58% to 12,351.

The S&P 500 added 0.67% and the Nadaq advanced 0.72%.

Asia Markets

The MSCI Asia Pacific Index rose 0.7% Thursday.

Japan's Nikkei 225 gained 0.48%; China's Shanghai Composite fell 1.13%; Australia's S&P/ASX 200 Index rose 0.33% and the Bombay Stock Exchange's Sensex index climbed 1.32% in Mumbai.

Asia benchmarks

Finfacts Reports

Noonan to outline latest 'final' solution for the Irish banking crisis 30 months after issue of State guarantee
Japan's manufacturing plunged in March in aftermath of devastating earthquake/ tsunami
Even at 4 percentage points faster growth Germany's weakest regions would take 45+ years to catch up
Dr. Peter Morici: US jobs report due Friday
Markets News Afternoon: Government scraps plans to sell EBS Building Society; Optimism among leading US CEOs rise
Anti-travel tax levy Ryanair to scoop €140m from new passenger compensation levy
US private-sector employment increased by 201,000 in March
Both Business Climate Indicator and the Economic Sentiment Indicator for the Eurozone fell in March
Irish Live Register: Unemployment rate at 14.7% in March; 441,193 people signing on; Numbers rose 1,100 in month
Eurozone retail sales rebounded in March

In Europe, the Dow Jones Stoxx 600 is up 0.06% in early trading Thursday.

The shares in the 3 listed Irish banks have been suspended - -  see story via first link in box above.

The ISEQ has risen 0.86% in Dublin.

CRH is up 0.30%; Elan has dipped 1.12% and Ryanair has gained 1.75% after announcing a new passenger levy yesterday that will give it additional gross revenues of €140m.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies 

The euro is trading at $1.4169 and at £0.8784.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index  fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak.

On Wednesday this week, the BDI slipped 27 points or 1.72% at 1,545.

The Financial Times reported earlier in January, that Australia’s flooding and fears of ship oversupply has pushed down a gauge of the cost of hiring ships to carry coal, iron ore and other dry bulk by nearly half since October to the lowest level since the aftermath of the financial crisis. The Baltic Dry index, the widely watched measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak reached on October 27, 2010.

Crude oil for May 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $104.88 per barrel, up 61 cents from Wednesday's close. In London, Brent for May delivery is trading on the International Commodities Exchange at $115.92. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is almost $12.

The FT said in early February that a surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, has depressed the value of the benchmark against other yardsticks. The International Energy Agency said on Thursday that with “few relief valves” to cut the stock overhang in Cushing, the price dislocation “may persist for months [or years] to come”.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,427.40, up $3.60 from Wednesday's close.

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