Bloomberg News

Former Anglo Irish Says 61% of Loans May Not Be Repaid in Full

March 29, 2012

Irish Bank Resolution Corp (ANGL)., which is being wound down by the Irish state after one of the costliest financial rescues in history, said almost two thirds of its loans are unlikely to be repaid in full.

IBRC, based in Dublin, said 17.8 billion euros ($23.7 billion), or 61 percent, of its loans were impaired at the end of 2010, rising from 48 percent at the end of 2010, it said in a statement today. Impaired loans are those unlikely to be repaid in full. The bank has set aside 10.4 billion euros of provisions to cover losses, it said.

The former Anglo Irish Bank Corp. and Irish Nationwide Building Society were merged last year to create IBRC after the cost of saving the two lenders helped push Ireland into a bailout. In all, the state has committed about 34.7 billion euros to the two real-estate lenders, and now wants European help to reduce the cost of saving the lender.

IBRC’s net loss narrowed to 885 million euros from 17.7 billion-euros, an Irish corporate record, in 2010. The year- earlier figure included an 11.5 billion-euro loss on the loans IBRC sold to the National Asset Management Agency and a separate impairment charge, mainly on soured loans, of 7.77 billion euros.

IBRC recorded a 426 million-euro loss on the disposal of assets during 2011, primarily on the sale of the majority of its U.S. loan book, it said. Some 803 million euros of IBRC’s 1.87 billion-euro residential mortgage portfolio was impaired at the end of 2011.

As losses at IBRC mount, the government is seeking to restructure the long-term costs of rescuing the lender, which was seized by the state in January 2009. The government financed almost all of the 35 billion-euro cost of rescuing IBRC through promissory notes -- a form of IOU -- that are scheduled to be repaid by the state over more than a decade.

Notes

IBRC currently uses the promissory notes for the majority of the collateral it is using to access emergency funding from the Irish central bank. For at least a decade, the state has committed to paying 3.1 billion euro a year to IBRC to help pay back the central bank.

Finance Minister Michael Noonan has indicated he may ultimately seek to use the euro-area bailout fund to refinance these notes. He has also said re-engineering the notes over 30 years at “more favorable rates” would lead to a “serious reduction” in the country’s debt burden.

IBRC said today it agreed in principle with Noonan’s plan to use a government bond to settle this year’s 3.1 billion euro payment as it seeks a broader solution.

To contact the reporter on this story: Joe Brennan at jbrennan29@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net


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