STATE-OWNED Anglo Irish Bank has set aside a further €700 million for potential losses on borrowings to Seán Quinn, bringing to €1.7 billion the potential loss the bank expects to incur on loans of €2.8 billion owed by the businessman and his family, The Irish Timeshas learned.
The increase on the expected loss on the loans to the Quinn family – Anglo’s biggest borrower – was taken in its accounts published last week covering the first six months of the year but was not disclosed by the nationalised bank.
The so-called bad loan provision of €700 million was included in the record six-month loss of €8.2 billion reported by Anglo.
The uncertainty over the future of Quinn Insurance, the most profitable part of Mr Quinn’s business, has forced Anglo to lower its expectation on how much of the loans it is likely to recover. Quinn Insurance was put into administration last March after the Financial Regulator expressed grave concerns about the company’s ability to cover its liabilities.
It’s understood that Anglo may be forced to set aside a further €500 million, though this may be the extent of the write-off as the bank has security worth about €600 million over the family’s extensive international property interests.
The bank has declined to comment, citing client confidentiality.
The Government has so far committed €22.9 billion to Anglo and the bank said that the cost to the taxpayer will not rise above €25 billion if there is no further decline in the property market or any unexpected losses on large customers.
This is also conditional on the National Asset Management Agency not paying any less than that paid for the previous tranches for the remaining €19 billion in loans it will buy from Anglo this year.
Quinn Insurance is on the market and Anglo has expressed an interest in taking control of the company to ensure the long-term repayment of the Quinn loans, although it is among a number of parties eager to take over the firm. Mr Quinn has said that his family would be able to repay the loans within seven years if the insurer remained within the control of the family and his group.
Anglo’s six-month losses included a loss of €5.8 billion on Nama loans and a further €2.5 billion on non-Nama loans. The bank’s management team met about 15 politicians from various parties yesterday to explain why they believe their plan to split Anglo into good and bad banks was the lowest cost to the State.
The bank invited the politicians to the evening briefing as Government Ministers lean towards a long-term wind-down of the bank.
The European Commission is expected to rule on Anglo’s restructuring plan within weeks.
