Bailed out Anglo Irish Bank on Tuesday reported the biggest first-half loss in Irish corporate history, hit by soaring bad debt and a weak economy, forcing the cash-strapped government to put in even more money to keep it afloat.
Anglo, which was nationalised in early 2009 to save it from collapse, said in a results statement that it made a record pre-tax loss of 8.2 billion euros (10.4 billion dollars) in the six months to the end of June.
The shortfall included a huge impairment charge of 4.8 billion euros, while Anglo also faced a 3.5-billion-euro loss on loans it sold at a discount to the National Asset Management Agency (NAMA). An impairment charge acknowledges unexpected costs or losses, such as bad debts.
The bank also revealed on Tuesday that the Irish government had pumped another 8.58 billion euros into the troubled group.
In recent years, top Irish lenders have become grossly over-exposed to lending to property markets, most notably in commercial property.
Anglo chief executive Mike Aynsley, who took the top job in September 2009, slammed the group's previous management over the failed strategy.
"Domestic and international economic conditions have clearly had very serious repercussions for the group," Aynsley said in the earnings release.
"The bank, under the previous management, entered this economic downturn over-leveraged and over-exposed to commercial property markets.
"The unprecedented contraction in economic output and the legacy effects of the policy mistakes pre-nationalisation have had a considerable adverse impact on the group's results and financial position, contributing to a loss for the six-month period of 8.2 billion euros."
The Irish government has set up the NAMA -- a so-called 'bad bank' -- to buy soured property loans from banks at a discounted price in a bid to stabilise the sector and remove toxic assets from balance sheets.
Anglo Irish, like many rival banks, was ravaged by the global financial crisis and a deep recession, alongside the property market meltdown, resulting in billions of euros of bad debts -- or loans that have to be written off.
"The severe contraction in the Irish property market, rising unemployment and weak consumer demand which characterised 2009 continued to influence asset prices and impairment charges into the first half of 2010, culminating in the reporting of a pre-tax loss," added chairman Alan Dukes.
"In addition, international funding markets were stressed during the period, which impacted the bank's funding and liquidity position."
The latest injection of state cash, meanwhile, means that Anglo Irish Bank has now received a staggering total of 22.88 billion euros in government money.
The extra funds were needed "in order to protect the capital position of the group" amid the worsening losses, it said.
Anglo added Tuesday that it would seek to wind down at least 80 percent of its business over the next 10 years.
"We have considered in detail a number of alternative strategic options for the future of the bank, including an immediate liquidation," Dukes said.
"After detailed consideration, we have decided to pursue a plan to split the bank, winding down at least 80 percent of the old bank and creating a new viable bank from the remaining good quality loan assets.
"It is the board's strong view that this restructuring plan represents the best possible outcome for the taxpayer of all the alternatives available."
Finance Minister Brian Lenihan said the government wanted a solution for Anglo that would minimise the cost for the taxpayer.
"We are at a very advanced stage in our discussions with Brussels in relation to the future of the bank. Today the final documentation was despatched from our department (of finance) to Brussels," he told RTE radio.
The results were published one week after Standard and Poor's lowered Ireland's sovereign credit rating to AA- from AA, saying the projected fiscal cost of financial-sector state support had increased significantly.
"This is another grim set of results for the nationalised bank," said GFT analyst David Morrison.
"While not a complete surprise, the results remind investors that Ireland's problems are far from over, as the government is forced to pour in more funds to keep the bank afloat."
Copyright 2010 AFP Global Edition
