Anglo Irish Bank report and PwC report

The report is out. Download it here. (Hover, or right click and save as..)

Update: The PwC report was published at 9.20pm. Here it is.

First impressions: It’s 44 pages long. Wasn’t this report over 700 pages? Seems as though they were busy cutting the best bits.

On Page 26 we get this:

The Bank has a number of very large exposures with approximately 15 relationships in excess of €500 million. The size of these exposures increases the risk profile of the Bank. However, the Bank considers that in all cases they are supported by diverse portfolios of assets underpinned by material contractual cashflows and with significant personal/corporate recourse.

The explanation of the lack of pages:

The vast bulk of the PwC Reports was a description of customers’ loan exposures, none of which is included in this Summary Report. The descriptions of customers included a summary of various loans, partnerships, underlying assets, security etc.

Another interesting new bit, I was not aware of:

Banking Book Assets (Available-for-sale financial assets) includes RMBS’s, ABS’s, CDO’s totalling €1.9 billion which are difficult to value and probably illiquid in the current market.

So they have CDO-type assets worth next to nothing?

It seems there was a run on the bank:

As of 27 September 2008, Anglo was forecasting net negative cash of €12.0 billion by 17 October 2008. The principal reason is a €10 billion reduction in corporate and retail deposits consistent with recent deterioration. There has been a €5 billion deterioration in corporate deposits and €440 million deterioration in retail deposits in the last week. The projections assume completion of a securitisation of part of the loan book for €2.2 billion and successful bidding for ECB funds.

This juicy bit:

In our Phase II report we commented that there were large exposures to a number of developers with residential land banks and development sites which are geographically close in South Dublin and Wicklow. Our work on Phase III has highlighted the fact that this concentration of exposure also applies in the next 50 largest land and development loans.

Taking both phases of our work into account there is currently a large over-hang of unsold higher density residential units in these areas accounting for a number of years supply and on top of this there are sites without planning permission in relation to which developers are hoping applications will be processed when local authority infrastructure and planning issues are resolved. Successful disposal of the current and ‘pipeline’ stock will take many years and appear unlikely to occur at current unit price levels. There are likely to be significant losses for individual developers and in turn the Bank as a result.

In other words, all of the money that was spent on buying the land and building the houses is gone, and will never return. The developers will never make a profit on it. The developers involved will be bankrupted by this. Anglo lended recklessly.

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