Anglo’s chief executive says need for further injection of taxpayers’ money is unlikely

IF THERE was a silver lining on the banking announcements yesterday it was the forecast from Anglo Irish Bank that it did not expect the cost of the bank would exceed €29.3 billion given conditions in the markets.

“With a fair wind behind us we don’t think the taxpayer is going to have to put in any more money,” said chief executive Mike Aynsley.

“We think we are at the bottom of the problems in the books that we have. Now the job for us is to get the best value for the loans.”

Instead, yesterday was about understanding the extent of the problems at Bank of Ireland, AIB, Irish Life and Permanent, and building society EBS.

Anglo has travelled this road already – it has gone further in stress-testing its own book.

“Today is about the other banks and underpinning the banking system,” said Aynsley.

“This should give substantial more certainty to the market about the level of problem loans.”

That is not to say that options should not be explored to reduce the cost of Anglo by other means.

To this end, the thorny issue of passing some of the losses on to Anglo’s senior bondholders, who are owed about €6 billion, is still coming up in debate after debate.

Anglo redeemed senior debt of €9 billion in 2010, repaying the bondholders in full. A further €750 million was repaid in January and another chunk, about €1 billion, is due to be repaid to senior bondholders in November.

The bank’s 2010 annual report, published yesterday, shows the extent of the clean-up at Anglo.

Aynsley yesterday described the work to date as “cleaning the scum off the top of the pond”.

Expenses rose to €353 million from €309 million because of a one-off cost of €62 million paid to outside consultants for restructuring, Nama and “legacy matters”.

The bank has had to pay for four restructuring plans (three of which were shelved) and the due diligence on the Nama loan transfers. The legacy matters relate to pursuing former directors and irate borrowers over unpaid loans.

Anglo chief financial officer Maarten Van Eden said that old Anglo had – in the rush to lend to its borrowers – failed to input the appropriate information on loans.

“The bank was killing itself to do the next deal so that there was very little information in the system. When the music stopped we had a loan book but very little dependable data,” said Van Eden.

Aynsley said Anglo had to spend to improve information systems to manage the bank’s run-down.

“We are a wind-down bank in a sector of the market that is incredibly stressed and we are having to deal with very litigious customers,” he said.

“It was a huge catch-up exercise on the neglect from previous years and you would expect a professional bank to have information ready on loans at the press of a button. We are catching up.”

Aynsley declined to comment on the bank’s joint bid with US insurer Liberty Mutual for Quinn Insurance, the company owned by businessman Seán Quinn who owes the bank €2.8 billion, mostly over losses on Anglo shares.

“This is a very difficult thing for Seán Quinn given where he has been and the incredibly successful businesses he has developed over the years,” he said.

“But the reality is that the businesses need to be protected and the prospects for the region where he is based needs to be protected so we are doing what we can to work with the authorities to lock down a solution.”

Aynsley said the Anglo/Irish Nationwide entity could be used to manage or warehouse any excess loans that must be offloaded from the other four banks. “We could end up being like The Borg and we will assimilate what we are given and do the best job we can managing it,” he said.

ANGLO REMUNERATION: AYNSLEY RECEIVED €974,000 IN 2010

ANGLO CHIEF executive Mike Aynsley received a pay package of €974,000 for 2010, including a salary of €500,000, the Government cap for senior bankers.

Mr Aynsley's remuneration includes benefits of €341,000, before income tax deductions, and a pension payment of €133,000.

The bank said in its 2010 annual report that the benefits include "a car allowance, a temporary rent allowance, agreed travel expenses, agreed relocation related expenses and club subscriptions".

Mr Aynsley said the benefits included a housing allowance as his family had not moved to Ireland from his home in Australia.

Also included in his pay deal were the cost of eight air fares for family members to visit him and his own travel expenses to return to Australia during the year.

Alan Dukes, the chairman of Anglo, received fees of €127,000 for 2010 while five other board members shared fees €389,000.

During the year, board members were reimbursed €25,000 for travel and subsistence expenses, €5,000 for telephone expenses, €5,000 for entertainment, €6,000 for relocation expenses and €5,000 for other expenses.

The bank paid €97 million to 1,332 staff, averaging €73,000 per employee. Mr Aynsley defended the salaries. "We have a very difficult job to do and we need to have the best people we can get to achieve the results that the taxpayer expects," he said.

Anglo had 1,296 staff at the end of last year. This has fallen to 1,050 since then, taking account of the transfer of 210 staff with the banks deposits to AIB. Of this total, about 150 staff work within the banks internal Nama unit.

Some 250 staff will move to Anglo with the acquisition of Irish Nationwide and a further redundancy programme will reduce the head count at the combined bank to below 1,000 by year end, Mr Aynsley said.