THE BAILOUT cost of Anglo Irish Bank is not expected to exceed the €29.3 billion already committed by the Government, according to chief executive Mike Aynsley.

Confirming the bank’s loss of €17.7 billion for 2010 with the publication of the bank’s audited results, Mr Aynsley said that Anglo had gone further than the Central Bank capital stress tests to quantify the scale of losses on problem loans.

“We have gone worse and we have stressed further,” he said. “That is why we are pretty confident we are at the bottom of the issues in our portfolio and we don’t expect any surprises beyond that.”

The Government said last year that the cost of the bank could rise to €34.3 billion if there was no recovery in the property market.

Maarten van Eden, Anglo’s chief financial officer, who will leave the bank this month, warned that the capital cost could rise if bank funding remained high.

“The funding equation is the key factor for the Irish banking sector,” he said.

Anglo’s current cost was based on commercial property values falling 60 per cent from peak, he said.

Values would need to drop 80 per cent to push the cost to €34.3 billion in a stress case. “It’s a pretty massive stress,” he added.

The bank received the first €2.5 billion payment under the €25.7 billion promissory note, the IOU which allows the Government to spread out the cost of Anglo over time.

Mr Van Eden described the payment as “the first drop of rain after the drought”.

The bank has set aside €8.8 billion to cover losses on the €35.8 billion of loans remaining with the bank following the transfer of €36 billion in loans to the State property loans agency, the National Asset Management Agency.

Mr Van Eden said there would be further loan loss charges on the remaining loans but that this would be covered by a buffer of cash within the €29.3 billion cost.

“There will be further impairments this year but significantly less than before,” he said.

The bank plans to run down Anglo over seven to 10 years. The remaining loans will be run off at a rate of about 10 per cent a year by selling loans or pushing for loans to be refinanced elsewhere, or foreclosing on distressed borrowers.

Mr Van Eden ruled out a sale of a loan portfolio or the €6.3 billion US loan book. “We would not be interested in a portfolio-type transaction because you will simply not get good value,” he said.

Mr Aynsley confirmed that the bank would avoid fire-sales of loans. “We are going to wind down our books in a way that is consistent with maximising value,” he said.

Anglo will repay €56 billion of loans drawn from the Irish and European central banks over time through cash generated from loan recoveries, said Mr Van Eden.

Central bank borrowing rose from €45 billion at the end of 2010 following the transfer of €11 billion in deposits to AIB last month.

Anglo submitted a plan to the National Treasury Management Agency yesterday, outlining proposals to take over and merge the rump of Irish Nationwide Building Society, wind down or sell the bank’s wealth management division and to close overseas offices in Jersey, Vienna and Dusseldorf.

The bank has said that once the process to merge Irish Nationwide into Anglo began the union should be completed within “a couple of months”, said Mr Van Eden.

Mr Aynsley said that the Anglo Irish Bank name would be removed and replaced with a new one as soon as Minister for Finance Michael Noonan approves the move.

The Irish Nationwide name would cease to exist within the coming months, he said.