ANGLO IRISH Bank chief executive Mike Aynsley has said he expects the final cost of the bank bailout to be “somewhere between” €25 billion and €28.5 billion under Government’s wind-down plan.
The bank’s earlier estimate of a further €3.5 billion cost – on top of the current cost of €25 billion – for a 10-year wind-down could not be applied to the Government’s plan as Anglo had costed a wind-down under a different scenario, he said.
“I suspect we are going to have a result somewhere in between,” he said. He has said that the current expected cost of €25 billion was “a pretty good estimate”.
He could not reconcile the cost of €35 billion estimated by credit ratings agency Standard Poor’s last month, given the bank’s assessment of potential losses, he said.
This estimate involved “some pretty severe stress scenarios” on the bank’s loans overall, he said.
Anglo had not provided a cost of setting up a funding bank and an asset recovery bank to be wound down over time under the plans sent to the European Commission.
“The major difference is that the asset recovery has the advantage of having a banking licence in the run-down,” said Mr Aynsley.
The recovery bank would preserve the value of good loans by working with those customers and this would reduce losses, he said.
The bank had estimated it would recover 68 per cent of the original value of its good loans in the restructuring plans.
Mr Aynsley said the bank would make a saving under the Government’s plan as the management’s plan for a good bank/bad bank would have involved the hiring of up to an additional 400 staff.
Anglo would reduce its 1,200 workforce over time, he said.
The Government’s plan was also unlikely to involve the replication of two banking functions. The bank had planned to separate the two operations of the good bank and asset-run-down firm in a full physical split.
Mr Aynsley said there was “a reasonable chance” of splitting the nationalised bank by the year-end.
“There is much work to do between now and the physical split but we will work through it as quickly as we can,” he said.
Mr Aynsley said the bank was close to determining the final cost of the toxic bank to the State.
“We are at the tail end of that process,” he said, adding that it would take “three to four weeks” for Anglo and the Financial Regulator to estimate a cost of setting up the two new rebranded banks.
“We have got clarity on where we are going and certainty that Anglo is going to cease to exist on the splitting of the bank,” he said. “What we don’t have absolute certainty on is on every detail.”
The management team had already carried out considerable work assessing the loans and it would be “a lot quicker than starting from scratch”, he said.
Mr Aynsley said he was still enthusiastic about solving the Anglo problem, despite the rejection of management’s own plan.
“I might not agree with everything in their split but I think it is workable,” he said.
Mr Aynsley confirmed the bank had lost deposits before the Government’s plan this week due to the uncertainty over it future. “We have lost some but we have not lost a huge amount,” he said.
The bank may see some reductions in certain types of deposits as some customers only want to deal with a going concern bank.
Ratings agency Moody’s maintained its review on Anglo for a possible downgrade, citing the likelihood that the bank would require further Government capital.
