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Anglo Irish Expects 2010 Loss Of 17.6 Billion Euros

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http://noir.bloomberg.com/apps/news?pid=20601087&sid=adWtuSojKlI8&pos=4

Feb. 8 (Bloomberg) -- 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.”

Irish Bailout

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.

‘Orderly Workout’

“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.

Capital holes to be filled by the German taxpayer, methinks.

The PIIGS show isn't over yet - not by a long stretch.

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The bursting of the bubble in Ireland is going to end up costing about EUR 25,000 per person.

The cost to the UK will probably be in the order of GBP 15,000 per person or GBP 900 bn in total.

The cost in the UK will probably be borne by savers in the form of monetary debasement and the general public in the form of higher taxes.

I am a capitalist and it upsets me that the cost is not being borne by those who took the rewards during the good times : shareholders and bondholders ought to be the ones getting crushed rather than savers and taxpayers.

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The bursting of the bubble in Ireland is going to end up costing about EUR 25,000 per person.

The cost to the UK will probably be in the order of GBP 15,000 per person or GBP 900 bn in total.

The cost in the UK will probably be borne by savers in the form of monetary debasement and the general public in the form of higher taxes.

I am a capitalist and it upsets me that the cost is not being borne by those who took the rewards during the good times : shareholders and bondholders ought to be the ones getting crushed rather than savers and taxpayers.

Where do you get losses of 900billion in the UK?

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Where do you get losses of 900billion in the UK?

An educated guess. Our bubble was a bit smaller than Ireland's so I discounted their cost per capita and multiplied it by our population.

My GBP 900 bn estimate also ties in roughly with the actual and contingent liabilities that taxpayers have taken on. These costs will be realised in a combination of nominal (cash) or real (monetary debasement) terms.

http://www.independent.co.uk/news/uk/politics/163850bn-official-cost-of-the-bank-bailout-1833830.html

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Could any of the US banks help the Irish put a different slant on these poor figures?

US investment bank Merrill Lynch had a critical role in the banking collapse in Ireland and censored an analyst's report that predicted the crash back in 2008, it was claimed today.

The US bank retracted a report by one of its research analysts in March 2008 that was negative about the banks after the Irish banks called Merrill Lynch and threatened to take their business elsewhere. It toned the research note down and months later its author, Philip Ingram, left the bank, according to a much-anticipated cover-story in the new edition of Vanity Fair.

And one of his colleagues, Ed Allchin, was made to apologise to Merrill's investment bankers individually for the trouble he'd caused them by suggesting there was still money to be made by shorting Irish banks.

Allchin, who has since set up a new company Autonomous Research refused to comment. "I haven't even seen the article," he said.

The 15 page Vanity Fair article is written by Michael Lewis, a former bond trader who described his experiences working at Salomon Brothers in the bestselling book, Liar's Poker.

It includes interviews with Brian Lenihan, Joan Burton, economist Morgan Kelly and one former Merrill Lynch bank trader who claimed he had offered to sell "a pile of bonds" back to one Irish bank for 50 cents in the dollar back in 2008 before the bank guarantee.

"He's offered to take a huge loss, just to get out of them," says Lewis. When he woke up on 30 September to find the Irish government had guaranteed them "he couldn't believe his luck".

He says Ingram's note for Merrill had been sent to the market in March 2008 but was withdrawn within hours.

"For a few hours the Merrill Lynch report was the hottest read in the London financial markets, until Merrill Lynch retracted it. Merrill had been a lead underwriter of Anglo Irish's bonds and the corporate broker to AIB.

"Moments after Phil Ingram had hit the send button on his report, the Irish banks called their Merrill Lynch bankers and threatened to take their business elsewhere," says Lewis. Anglo Irish did the same.

"Ingram's superiors at Merrill Lynch hauled him into meetings with in-house lawyers, who toned down the report's pointed language and purged it of its damning quotes from market insiders, including its many references to Irish banks. And from that moment on, everything Ingram wrote about Irish banks was edited, and bowdlerized by Merrill Lynch's lawyers."

Merrill charged €1m per page for its advice

Six months later, at the request of the Irish government, Merrill Lynch's investment arm wrote a seven-page memo that stated, "All of the Irish banks are profitable and well capitalised".

It charged €7m for the seven-page memo which fed into finance minister Brian Lenihan's controversial decision to introduce a blanket guarantee for the Irish banks in September 2008.

Months later, Bank of America took over Merrill Lynch amid fears that the bank, once the third largest on Wall Street, would itself fall victim to the tightening of the credit markets and the worsening property sector. Merrill says that Ingram's departure came as a result of the redundancies caused by that wider restructuring, and that he was not fired.

Lewis's article is part of a Vanity Fair trilogy on the global crisis – and was expected to further dent Ireland's already battered image in international markets.

In some respects Lewis obliges.

Any Irish reader who wants to save being offended can skip the last quarter of the article which leaves an impression that the Ireland is a land of fairies, potato farmers and rural unsophisticates.

But the article is well worth reading. It packages the drama of the last two years and particularly last November brilliantly.

It has a fascinating interview with Morgan Kelly who says he rues the day he went on TV. "I'll never do it again".

He asserts how the Irish Independent first refused to publish Kelly's article on the impending collapse on the grounds it was offensive and how the PR department in his University College Dublin tried to hose him down by asking the head of the department of economics to "write a learned attack" on Kelly's piece, which was eventually published by the Irish Times.

http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2011/feb/02/ireland-merrill-lynch-research-note-irish-banks

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An educated guess. Our bubble was a bit smaller than Ireland's so I discounted their cost per capita and multiplied it by our population.

My GBP 900 bn estimate also ties in roughly with the actual and contingent liabilities that taxpayers have taken on. These costs will be realised in a combination of nominal (cash) or real (monetary debasement) terms.

http://www.independent.co.uk/news/uk/politics/163850bn-official-cost-of-the-bank-bailout-1833830.html

That was the worst case scenario if the whole UK banking sector went bust and the UK govt picked up the tab like the Irish govt has had to do. Seeing as we know it did not then losses are going to be nowhere near 900billion. One example is that in those figures there is a loan guarantee scheme that at the time Lloyds was expected to be part of and because the loans were nowhere near as bad as first feared at the height of the crisis Lloyds did not join and IIRC paid the govt 3.5bill for the privilege. So no 250bill loss there. Again with the SLS, if the assets the banks put into the SLS were worthless then we would have lost 200bill, we know they are not and again the assets are much better than thought so Lloyds again has bought 40billion of them back.

So if we have a black swan like total collapse of Spain then there may be a few hundreds of billions of losses but if not it would not surprise me if the UK govt made a profit out of the banking rescue.

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I have heard that rot before and cannot for the life of me fathom why anyone might think that.

To arrive at that conclusion you have to narrowly consider the capital pumped into the banks and exclude the money printing and 0% interest rates and steep yield curve to re-capitalise the banks by the back door effectively by raping savers whose savings fail to keep up with inflation, and workers whose wages fail to keep up with inflation.

Young people pay because house prices are kept at bubble levels. Pensions suffer because of low bond yields and retiring savers receive low annuity rates.

etc etc etc

We all lose to keep banks and their staff happy.

EDIT: Oh and see my quote above about the BoE's own assessment of how much the annual subsidy to banks is right now. Then re-do your sums.

My comment is that the GOVT could make a profit.

Your argument is that the people of the country are losing out. I do not disagree with your point but it was not the point I was making.

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Could any of the US banks help the Irish put a different slant on these poor figures?

Some of the missing bits from ML's note are available on Alphaville

I particularly like this bit:

irelandquote4.jpg

:blink:

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EDIT: Oh and see my quote above about the BoE's own assessment of how much the annual subsidy to banks is right now. Then re-do your sums.

What do you think this funding subsidy is?

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That was the worst case scenario if the whole UK banking sector went bust and the UK govt picked up the tab like the Irish govt has had to do. Seeing as we know it did not then losses are going to be nowhere near 900billion. One example is that in those figures there is a loan guarantee scheme that at the time Lloyds was expected to be part of and because the loans were nowhere near as bad as first feared at the height of the crisis Lloyds did not join and IIRC paid the govt 3.5bill for the privilege. So no 250bill loss there. Again with the SLS, if the assets the banks put into the SLS were worthless then we would have lost 200bill, we know they are not and again the assets are much better than thought so Lloyds again has bought 40billion of them back.

So if we have a black swan like total collapse of Spain then there may be a few hundreds of billions of losses but if not it would not surprise me if the UK govt made a profit out of the banking rescue.

The system needed GBP 850 bn or so of support.

The realisation of the cost of the support might be real or nominal. Real rates of return on savings now are roughly -4% to -10% depending on how savers live their lives. The ultimate realisation of the cost of the support to the banking system will be a combination of real and nominal costs.

I think that it is naive to assume that if no paper losses are realised from the bailout of the banking system that it has been cost free. The cost was just shifted to the effects of monetary debasement (or QE + the cost of negative real rates to savers if you prefer).

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The system needed GBP 850 bn or so of support.

The realisation of the cost of the support might be real or nominal. Real rates of return on savings now are roughly -4% to -10% depending on how savers live their lives. The ultimate realisation of the cost of the support to the banking system will be a combination of real and nominal costs.

I think that it is naive to assume that if no paper losses are realised from the bailout of the banking system that it has been cost free. The cost was just shifted to the effects of monetary debasement (or QE + the cost of negative real rates to savers if you prefer).

As said before I do not disagree, I was responding to an article in the Independent that listed only the potential cash loses to the UK govt.

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As said before I do not disagree, I was responding to an article in the Independent that listed only the potential cash loses to the UK govt.

Fair enough.

I used to think the same way that your previous post described but came to the conclusion that the nominal cost of the bailout scheme misses the larger real costs.

Almost by definition, net savers are taxpayers. The cost of the scheme to net savers includes both nominal costs and the effect of monetary debasement.

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Fair enough.

I used to think the same way that your previous post described but came to the conclusion that the nominal cost of the bailout scheme misses the larger real costs.

Almost by definition, net savers are taxpayers. The cost of the scheme to net savers includes both nominal costs and the effect of monetary debasement.

Also do not forget that savers have been screwed over the whole decade of the 2000's not just during the crash. Every since Super Gordo started to use CPI and not RPI savings rates have been below RPI. I saw some research that the instant access savings account rate averaged 1.99% over the decage and RPI averaged 2.5% so savers were .51% worse off. Only other decade it happened was 1970's and I bet if you told the average man in the street they would be surprised.

So savers money paid for the boom and then they pay of for the cleanup, double whammy in banker speak.

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At least the Spanish banks are profitable......

Can the Irish hole be realistically plugged without the use of free fantasy money?

If only they had Gordon to show the way, our banks have all been fixed.

they just need to expand into the Americas like the Spanish banks

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Is this Philip Ingram report on the web anywhere?

I find it hard to believe it's not been leaked somewhere.

The whole note was on FT Alphaville, but Merrills had it taken down.

Bits of it are still available, see my previous post.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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