The Irish Economy
Commentary, information, and intelligent discourse about the Irish economy
Are out. Enjoy.
I’m puked out. €8.3 billion of citizenry flesh back dated to Dec 31, 09. Over and Out.
70% of the loans heading into NAMA are currently impaired!!!!!!!
And another 11% are past due but not impaired.
From the report.
“Caring for the environment
At Anglo Irish Bank, we take a responsible approach to environmental issues and have worked with our print partner to minimise
the environmental impact of our Annual Report publication.”
They’ve been responsible for something that’s for sure.
What happens if we hand the company to its Bond Holders?
Page 38: Balance Sheet:
* Debt securities in issue €15.1bn
* Subordinated liabilities €2.4bn
* NB: page 103, €7.4bn of the €15.1bn matured before Govt guarantee is up.
So, that’s €10.1bn, left over.
Just enough to cover the expected €10bn equity call that Govt expects to receive in the future.
Shame though, gov’t would have to write off the equity investment they’ve made to-date.
Page 86 is where the NAMA stuff really starts, FYI.
Sale and repurchase agreements with central banks include €12.2bn (30 September 2008: €7.6bn) borrowed under open
market operations from central banks and €11.5bn (30 September 2008: €nil) borrowed under a Master Loan Repurchase
Agreement (‘MLRA’) with the Central Bank and Financial Services Authority of Ireland. The interest rate on this facility is set by
the Central Bank and advised at each rollover, and is currently linked to the European Central Bank marginal lending facility
rate. Collateral assigned under these agreements is derived from the Bank’s customer lending assets (note 27).
Let’s compare BOI nama stats versus Anglo nama stats
* € 12.2bn of assets to transfer
* € 5.4bn neither past-due-date nor impaired
* € 6.8bn past-due-date / impaired
* Provision € 2.2bn in the period
* provision as % of past-due/impaired: 33%
* cumulative provisions €2.8bn
* provision as % of past-due/impaired: 42%
* Haircut on Nama transfer phase 1: 35%
* € 35.6bn of assets to transfer
* € 6.6bn neither past-due-date nor impaired
* € 29.0bn past-due-date / impaired
* Provision € 10.1bn in the period
* provision as % of past-due/impaired: 35%
* Haircut on Nama transfer phase 1: 50%
Easy to see there’s could be another provision coming. Anglo looks less aggressive than BOI at provisioning.
Note 58, page 174. “Events after the reporting period”
There’s a special mention of the High Court “appointed two joint provisional administrators to a significant corporate borrower of the Group”. I wonder if this is Quinn?
take the 15bn senior debt
subtract 2bn that is CP and covered
leaves you with 13bn
now subtract 7.4 maturing within the guarantee
leaves 5.6bn maturing post the guarantee
plus 2.4bn subbies
Do you want to repudiate the guarantee?
Losses in excess of 8% of GNP! Core Tier 1 capital of €4.6bn AFTER the state injects €8.3bn. Presumably they are expecting RWA reductions to bring the capital ratios above the required levels. Plus, the charge-off against transfers to NAMA is only 28% – isn’t that just putting off another hit? The CERN lads would be better off looking at Anglo to see a modern-day black-hole….
Some derivative losses there too; in normal times they’d be considered whacking great losses!
Was there any mechanism by which Anglo could have lost money and didn’t?
(I appreciate there’s a certain amount of Pandora’s box, but even so).
Thanks for correction. So their is a €8 bn bondholder “cushion”.
Was rather nice of the Govt to let Anglo re-fi €5.9bn during the reporting period.
If they had handed the bondholders the company first, yesterday’s promissory note would have been €4.4 bn not €8.3bn.
And since the bondholders wouldn’t have had a choice, the Govt would have been in a position to re-nationalize the business a second time.
“Our aim is to create a medium-sized commercial bank with a well contained risk appetite and stable funding base, operating in Ireland,
the UK and the US. Our focus will be on making the Group viable again, then gradually growing the Ireland business while maintaining our share in other markets.”
Are these guys serious? A medium sized commercial bank- what do they think BoI and AIB are….all this from a building society on crack. Appears to me that wholesale bankers have a lot to learn about the business of building sustainable retail businessbanking operations.
[eyebrow raise] Additions to the AFS portfolio during the financial period include €1.5bn of government bond purchases and €0.9bn of debt
securities issued by financial institutions.(page 86) [eyebrow lowered]
why and who?
I see my personal favourite, the Master Loan Repurchase Agreements are still in it.
For those that missed my previous rants, Master Loan Repurchase Agreements are CB of Ireland liquidity repos for the bank. I wondered why these things needed to exist, considering the amount of ECB liquidity there was floating around.
Anyway, in the March ’09 books, the MRLAs were repos worth €10bn that were backed by €14.8bn worth of assets. Not an ideal arrangement (seen as the Irish CB were totally on the hook if the things went south) but at least they have a reasonable buffer after only paying 67% of the asset value.
In the books published today, the MRLAs are still there, and, if anything I am even more astonished by them. Now the MRLAs are €11.5bn, but only have €12.9bn woth of assets backing them. So the CB have paid 90% of book for the assets.
Does this mean that Anglo have €12.9bn of AA+ asssets that they have decided to repo through the central bank rather than use them for other bonds, or that the CB has decided to place their funds at risk by overvaluing assets in order to support the bank?
you are correct. However, that was the choice made by our political leaders. Could Anglo have been left out of the guarantee. Was it proposed at the time. That is a subject for an equiry
@ L RX
Scary…another potential loss to the exchequer looms. Can a CB become insolvent?
Any chance that DG COMP will ride to the rescue of Irish taxpayers? Its announcement of an in-depth investigation into Anglo and its demand for a revised business plan by end-May suggests it’s not a happy bunny. Given its powers it has the ability, at least, to reveal, if not to kick away, the dodgy planks supporting the elaborate edifice the DoF is constructing.
The question is: does it have the powers and willingness to curtail the grant of state aid and, thereby, to force an orderly wind-down which would impose losses on bondholders? The problem for the Government is that it, and its predecessors of similar ilk, represented itself as having effective bank regulation in place and as pursuing a responsible fiscal policy which provided assurance to bond investors. How would the bond market react to some investors getting trimmed in a wind-down of Anglo? And what impact would it have on the property CMVs underpinning NAMA?
“Scary…another potential loss to the exchequer looms. Can a CB become insolvent?”
Only if the state that backs it does…
I have updated my estimate of the cost of the banking crisis (see table in blog). I included the earlier €10 bn MLRA as a possible (but unlikely) cost item. What do you think about this?
Sovereign default. The clock is ticking.
I’ve taken a Xanax. It’s sort of working.
Dukes confirms that it was only on Tuesday that they knew the size of the NAMA discount and that is where the latest 10 billion hole comes from.
The NAMA valuation is not a matter of opinion.
Zhou on another thread has worked his way through the formulas.
Surely he is not the only one capable of doing the maths.
If they know so little about their business, why should we believe their estimate of the cost of closure.
“7.4 bn maturing within the guarantee”
Does that mean 7.4bn must be paid up within the next 6 months? What the normal maturation period for these bonds?
The rump Anglo will have loans of €30.8bn of which €14.27bn are past due or impaired carrying provisions of €4.84bn (3.64bn specific 1.2bn general. Of these €12.2bn are due within one year, €13.7bn within 5 years and €5.76bn over five years. So why can’t this bank be wound down within 5 years? And why are the costs estimated at €20bn-€30bn?
This is a bank which had 2500 loan customers in Ireland of a total of 4300 – of which the top 20 owed 24% – how can it be suggested the rump has the basis for forming a “medium sized commercial bank” ? The rump net existing provisions consists of €23.bn in commercial loans (property) €2.19bn residential (property) and a heading called business banking (?) of €4.5bn.
“Does that mean 7.4bn must be paid up within the next 6 months? What the normal maturation period for these bonds?”
Yup. Not sure about normal, but given the expansions the Irish banks undertook in the last ten and particularly the last five years, you’ve a large enough window for a normal rollover of reasonable length bonds. AIB and BoI have, I believe, significant rollover this year and next too.
Taoiseach Denies ‘Economic Treason’
Brian Lucey is waxing eloquent on VB about the fanciful sums they are saying it would cost to wind up anglo .. some formulas involving the cosine of jupiter over the asteroid belt etc..
Is the 12bn figure then reducing then or staying more or less steady. I mean are there still bond buyers for anglo out there – and why
Note 7 reveals that we paid €819 million to buy back €2,571 million of subordinated debt to generate a ‘profit’ of €1,752 million.
This is the sort of nonsense that confuses throwing away good money with ‘accounting’ profits. It may make sense in a going concern, but is ridiculous for a rotten carcase like Anglo.
“Note 7 reveals that we paid €819 million to buy back €2,571 million of subordinated debt to generate a ‘profit’ of €1,752 million.”
To be clear, have Anglo’s management wasted €819 million making an unnecessay purchase to show a paper profit? If so, where were the public interest directors?
“Easy to see there’s could be another provision coming. Anglo looks less aggressive than BOI at provisioning.”
I think Anglo is creating provisions as quickly as its capital allows it.
Might I humbly suggest that Ango-Irish update its … er .. Corporate Governance page on its Web-Site … the Audit Commitee, in particular, needs some updating – only about three months out of date – as a concerned citizen owner I’m simply reminding the board of its duties in this matter.
“Is the 12bn figure then reducing then or staying more or less steady. I mean are there still bond buyers for anglo out there – and why”
From the accounts:
“MTN issuance in the period totalled €7.4 billion against
maturities and redemptions of €5.2 billion. €0.7 billion of the
Bank’s covered bonds also matured during the period. All
issuance during the period is Government guaranteed and
will mature by 29 September 2010. Between April 2009 and
December 2009 the Bank issued €5.4 billion of Government
guaranteed notes. Of the December 2009 MTN and covered
bond outstanding balances of €13.7 billion, €9.7 billion is
scheduled to mature by December 2010.”
So as long as the government is guaranteeing it, it is shifting. Unfortunately, this is short-term stuff so far and will roll-over in a bunch. Perhaps the new guarantee will help, at least Anglo will be paying for the guarantee then. Wonder how much of a recapitalisation it will need to pay the state back from the guarantee…
Has PWC delivered update/clarificaton on why they got it so wrong on Anglo-Irish 12 months ago?
Has Ernst & Young issed any clarifications?
Why do The Minister & 2_of_7 see things so differently in Anglo-Irish?
Who is Moore McDowell? Is he a Trotskyite? On Radio 1 right now …
… or KPMG – methinks I’m getting me BIG4s mixed up at times – Perhaps all 4 might provide an update on their involvement in all this over the past decade or so ……. An A4 from each will do for the mo ………
Anglo haven’t worked out a Loan-Deposit Ratio in their results for readers like BOI did.
Am I right in saying it is:
– Pre-NAMA: 72/27 = 266%
-Post=NAMA: 35/27 = 130%
Have I used the right figures there? Customer desposits is 27bn according to the results.
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