Irish Banks

Breakdown of Irish Banking Bailout by Bank – Compared to size of the banks

As most people know, the Irish banks were bailed out over a period of around 3 years, to a total of around €64 billion. A breakdown by bank of that amount is as follows:

  • Irish Nationwide Building Society (INBS) – €5.4 billion
  • Anglo Irish Bank – €29.3 billion
  • Bank of Ireland- €4.7 billion
  • Permanent TSB (formerly Irish Life & Permanent) – €4 billion
  • AIB – €19.8 billion
  • EBS – €875 million (which became part of AIB Group in July 2011)

One way to measure the scale of the banking crisis is to compare the bailout amounts to the banks’ operating profits in 2008, before impairments and tax (Bank of Ireland’s annual accounts ended in March 2009, while Anglo Irish Bank ended in September 2008 with the other banks ending December 2008).

Anglo Irish Bank comes out the worst with its bailout equating to 17.8 times the operating profit of €1.64 billion. INBS is a close second place with the bailout figure being 17.7 times its operating profit of €305 million for 2008.

In third place is PTSB with its €4 billion bailout being 16.3 times its 2008 operating profit of €245 million. In 2012, PTSB sold its Irish Life division for €1.3 billion bring the net bailout to €2.7 billion. However it is best to measure the scale of the banking bailout at the time the government had to first start recapitalising the banks, as they would have ultimately had to pay interest on the loans required for bailing out the banks. Even if the bailout is counted at €2.7 billion, then PTSB is still only one place behind.

Next is EBS with its bailout being 12.2 times its 2008 operating profit of €72 million. AIB is next in 5th place with its bailout equalling 7.3 times its 2008 operating profit of €2.7 billion. Bank of Ireland is therefore last with its bailout being only 2.5 times its €1.9 billon operating profit for the year ending March 2009.

The combined operating profits of the 6 banks are €6.86 billion which is 9.3 times smaller than the total €64.1 billion bailout.

Another way to measure the scale of the banking crisis is to work out the bailout amount per the number of employees at each bank, according to its annual reports.

Again, Anglo Irish Bank is the worst bank with its bailout of €29.3 billion equating to €15.7 million for each of its 1,864 staff at the time. Similarly the bailout for INBS works out at €14.03 million for each of its 385 staff in 2008.

The ranks of the banks now change places, with EBS coming next by having a bailout per staff of nearly €1.4 million for its 646 staff at the time. AIB has a bailout of around €765,000 for each of its 25,919 staff recorded at year end 2008. PTSB is close behind with nearly €729,000 required at the time for each of the bank’s 5,490 employees. Once again Bank of Ireland comes out the best with its bailout of €4.7 billion for 15,457 staff, working out at only around €303,000 for each employee.

The total amount of employees at the 6 banks was 49,791 at the time. With a total bailout at €64.1 billion, this works out at nearly €1.3 million per each member of staff.

Bank Bailout Figures





Progress of NAMA for 2014 – Over 50% Complete With End In Sight

The National Asset Management Agency announced today that it has redeemed a further €1 billion of NAMA bonds from the banks, bringing the total redeemed amounts to €16.1 billion which means that 53% of the €30.2billion in senior debt has now been paid back to the banks. The government agency, charged with taking over the distressed debt of 5 Irish banks in 2009, paid the banks a total of €31.8 billion in the form of €30.2 billion of NAMA bonds and subordinated debt of €1.6.

NAMA has been selling the banks’ former loans and assets to the highest bidders and accumulates the proceeds until the agency decides it has sufficient resources to be able to pay the banks back for some of these loans and so redeems the NAMA bonds.

The €31.8 billion that NAMA paid the banks went towards transferring loans which originally had a combined value of €74 billion. This means that the banks involved took a total discount of €42.2 billion which they were able to endure; as the total government bailout totalled €64 billion which was given to the banks over time, both before and after NAMA took over the targeted loans.

Over half of NAMA’s work relates to the two banks which later became IBRC (Irish Nationwide Building Society and Anglo Irish Bank) as the two banks received €16.8 billion for the loans (52.8% of total). It would be no surprise to most people that these two banks gave the biggest discount to NAMA – coincidentally the same discount rate of 61%. When IBRC was liquidated in 2013, the Central Bank took over the bank’s outstanding €13.7 billion of NAMA bonds with €1.1 billion of that later redeemed by NAMA that year, bringing the outstanding NAMA bonds in relation to IBRC at year end 2013 to €12.6 billion (this is not to be confused with NAMA taking over the €12.9 billion in debts IBRC had with the Central Bank at the time of liquidation, which has since been successfully repaid by the liquidators- the liquidation of IBRC relates to the part of the bank that was not transferred to NAMA).

AIB and EBS gave discounts of 56% and 57% respectively for a consideration totalling €9.4 billion (29.6% of total)

The most prudent bank, Bank of Ireland (currently the only bank to pay back all its bailout funds) gave a discount 43%-reflecting its more sensible relationship with developers- for €5.6 billion (17.6% of total). Permanent TSB was the only bank not to face the humiliation of NAMA taking over any of its loans as it is mostly a mortgages bank and so was not exposed to the spectacular losses of certain developers.

The €16.1 billion redeemed to date represents 50.6% of the total amounts originally paid to the banks, officially making NAMA past the 50% completion milestone- 2 years ahead of schedule.

Exactly 6 weeks ago, NAMA announced that it redeemed €15.1 billion of the total €30.2 billion in senior debt/NAMA bonds. This may have mislead many people into thinking that NAMA was halfway through its work at the time, as the total consideration of €31.8 billion should have been taken in to account, making NAMA technically 47.5% complete at that date.

As previously mentioned, at the end of 2013 €12.6 billion of bonds formally relating to IBRC, were still outstanding according to the Central Bank which means that €4.2 billion out of the original €16.8 billion NAMA bonds were redeemed leaving a progress rate at that time of 25%. The accounts for NAMA at year end 2013 reveal that the agency redeemed €7.5 billion in NAMA bonds, which out of a total debt of €31.8 billion, leaves a progress rate of 23.6%. This appears to indicate that the loans in relation to IBRC have been marginally more successful than all of the loans of NAMA. However two factors to bear in mind are that around 25% of the income of NAMA from inception to end of 2013 was from rental income, not from loan disposals, some of which may have gone towards redeeming debt in relation to IBRC. Another issue is that NAMA is accumulating certain proceeds to be able to lend to developers to increase the value of land associated with NAMAs loans – in other words it is delaying to a certain extent paying the banks back. It is therefore not fully known how successful the agency has been in dealing with each of the banks’ loans. Nonetheless, there is no evidence to suggest that the loans in relation to IBRC have been causing more of a problem than the other banks’ loans, as the general public would have considered the 2 banks that later became IBRC, to be the dodgy banks with white collar crime investigations.

Today’s announcement means that NAMA has redeemed a further €8.6 billion of its debt in 2014 alone (27% of total) which brings to 50.6% of the total debt redeemed since 2010 when NAMA redeemed only €0.75 billion in that year. The original plan of NAMA was to be 25% complete by the end of 2013 (which they nearly achieved), 40% complete by the end of 2015 and 80% complete by 2017.

NAMA plans to achieve redeeming 80% of its senior debt (76% of total debt) by the end of 2016.

According to the CEO of NAMA Brendan McDonagh, “Achieving this 80% target will require a substantial volume of NAMA loan and asset disposals in Ireland as well as Britain and elsewhere; for the most part, sales will involve commercial assets (offices, retail, hotel and leisure and industrial assets) or loans secured by commercial assets,”

Based on what the NAMA are saying and on looking at the progress made, particularly during 2014, the following completion milestones should be achieved:

  • 60% complete by June 2015
  • 70% complete by February 2016
  • 80% complete by October 2016
  • 90% complete by August 2017
  • 100% complete by March 2018

From reading between the lines based on what NAMA are saying, it looks like they won’t be selling loans at the same rate as they did in 2014 (unless they change their 80% completion target) as any profit the agency makes (which would increase by holding off selling loans in a rising property market) will go towards reducing the nation’s €64 billion banking bailout. NAMA only need to redeem a further €8.06 billion of debt in the next 2 years to reach their current target which is €540 million less than what they redeemed in the last 11 months alone. NAMA are now taking on the role of a developer to hopefully maximise the return for the taxpayer.

Irish Banks Account for 62% of Ireland’s Mortgage Market

At the time of the banking crisis in 2008 which badly affected Ireland, there were 6 Irish banks in existence. Two of those banks later merged together to form IBRC, and began liquidation proceedings over 4 years later, while the largest bank AIB bought the smallest bank EBS.

Clearly this leaves only 3 Irish banks left with AIB Group having the largest mortgage book with a value of €37.3 billion at the end of June 2014 which accounts for 27.5% of the total country’s mortgages by comparing these figures to Central Bank statistics for June 2014. Bank of Ireland had mortgages in the country totalling €26.3 billion during the same month (19.4% of the market) while at the same time, Permanent TSB had a mortgage book with a value of €20.3 billion (15% market share)

These 3 banks therefore have a combined share of 61.9% as at June 2014.

The next main mortgage player is Ulster Bank (owned by British bank RBS Group) which has a similar sized share of the market to Permanent TSB with a mortgage book in the Republic of Ireland worth €20.2 billion as at December 2013.

Danske Bank which bought the Irish bank NIB a few years before the banking crisis hit, had a mortgage book in Ireland worth €3.2 billion, according to the Accounts in Dec 2012 (in the unlikely event it has the same value today in a decreasing mortgage market, it would command 2.4% of the market) which has since been sold on to other lenders, some of which would not have been familiar to most people.

IBRC, the bank which announced liquidation in February 2013, had a mortgage book value of only €1.8 billion (concerning 13,000 customers as it was mostly a developer’s bank) according to its accounts for the second half of 2012, which would only give a market share of 1.3% based on June 2014 figures. These mortgages were sold off in tranches to the highest bidders, just like the Danske Banks mortgages.

In addition there are sub-prime mortgages worth around €3.3 billion (2.4% of market) which affect 18,000 customers, according to a parliamentary answer to TD Michael McGrath last summer.

The total of the mortgages book values mentioned, account for 83% of the Irish market. Other foreign owned banks would clearly account for the remaining 17%, such as KBC bank or any of the European and US banks with a banking license in this country who may not specifically advertise their mortgages to the Irish market.

The Central Bank mortgage statistics, used to determine the banks’ exposure to the mortgage market, as at June 2014, had a book value of €135.4 billion (906,762 mortgages), of which around 78% of the value concerned principal private dwellings and the reaming 22% involved Buy-To- Let mortgages.