Anglo Irish Bank Corp., taken over by the government two years ago, said it expects to post a pretax loss of about 17.6 billion euros ($24 billion) in 2010, the largest corporate loss in the nation’s history.
The Dublin-based lender lost 16 billion euros, or 59 percent, of its deposits over the course of the year, the company said in a statement today. The pretax loss exceeds the 12.8 billion-euro loss the bank posted for the 15 months to the end of December 2009.
Anglo Irish expects an 11.5 billion-euro loss on the sale of loans to the National Asset Management Agency, the nation’s so-called bad bank, and an impairment charge on other loans of 7.8 billion euros, it said. The figures haven’t been audited. Allied Irish Banks Plc held the record for less than a month last March, with a 2009 pretax loss of 2.7 billion euros.
The government today ordered Anglo Irish and a second state-controlled lender, Irish Nationwide Building Society, to sell their deposits and some assets. Anglo Irish Chairman Alan Dukes said today losses in the Irish financial system may amount to as much as 100 billion euros after a decade-long real estate boom collapsed.
“A clean banking core will require something in the region of 50 billion euros,” Dukes, 65, a former finance minister, said in an e-mailed copy of a speech today. “A clean banking restructuring implies the acceptance of irrecoverable losses.”
The government was forced last year into seeking an 85 billion-euro bailout, led by the European Union and International Monetary Fund, as deposits fled Ireland. Anglo Irish absorbed 29.3 billion euros of the 46 billion euros of capital Ireland pumped into its debt-laden banking system over the past two years.
Anglo Irish’s reliance on central bank funding soared to 45 billion euros at the end of December from 23.7 billion euros at the end of 2009, the company said, as depositors fled.
“Conditions in wholesale funding markets remain extremely difficult,” Anglo Irish said. “The bank continues to rely on government and monetary authority support mechanisms.”
Anglo Irish and Irish Nationwide will be merged as part of a restructuring plan, subject to European Commission approval, Anglo said in a separate statement today. The joint plan was filed with the EU last week.
“The restructuring plan envisages the orderly workout” of both lenders “over a period of years,” the Finance Ministry said. Anglo Irish and Irish Nationwide have also been directed by the government to sell “assets with a value equivalent to the value of the deposit books,” a ministry spokeswoman said. Irish Nationwide had 5.3 billion euros of customer deposits at the end of 2009.
The National Treasury Management Agency, which is in charge of bank restructuring for the government, said it will “immediately commence an auction process to invite interested, fully licensed financial institutions” to bid for Anglo Irish’s and Irish Nationwide’s deposits.
Restructuring of both lenders “is a step in the right direction,” Oliver Gilvarry, head of research at Dublin-based Dolmen Securities, said by telephone. Still, there is “uncertainty on how deleveraging of the total Irish banking sector will be managed, and whether it will result in further capital holes to be filled by the Irish state.”
Ireland agreed to sell banking assets and carry out a fresh round of stress tests as part of last year’s international aid agreement. The central bank will complete capital and liquidity reviews by the end of March.