Annual Report & Accounts 2009

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Business review continued and certain Directors of the Bank who resigned during the period. Detailed information in respect of the provisions on these loans is contained in note 55 to the Annual Report. In Ireland, the overall economic environment experienced an unprecedented level of stress during the period under review, resulting in declining property values, restricted availability of new credit, and reduced repayment capacities of borrowers. The current lack of liquidity in the Irish property market has also made the valuation and realisation of underlying security more difficult. UK In the UK 53% of the 15 month charge relates to development lending. Commercial and residential development values have declined significantly in the last 15 months. Losses of €1.0 billion on the UK investment portfolio, representing 7% of the portfolio, were lower than those experienced in Ireland. While the UK economy also suffered a downward adjustment during the period, the decline in the value of Sterling, low interest rates and government support in the form of quantitative easing has helped stabilise the property environment resulting in reasonable levels of activity. US Impairment charges on the Bank’s US loan portfolio totalled 8.6% of closing loan balances, the lowest level of charge across the three geographies. The US economy benefited from a large government stimulus package, which impacted favourably on the residential housing market and general liquidity in the market during the period. These measures helped mitigate the decline in values resulting from the global downturn. Impairment losses on the Bank’s US portfolio were primarily on development assets and in the hotel sector. Collective lending impairment provision A collective provision of €0.6 billion has also been charged in the period. This reflects an allowance for loan losses existing in the performing loan book where there is currently no specific evidence of impairment on individual loans. The provision has been calculated with reference to historical loss experience supplemented by observable market evidence and management’s judgement regarding market conditions at 31 December 2009. Cumulative collective provisions total €1.2 billion or 3.2% of total loan balances (excluding impaired loans). Treasury Funding overview The composition of the Bank’s funding profile has deteriorated since 30 September 2008. Material declines in customer funding balances and unsecured deposits from market counterparts have resulted in an increased reliance on funding support from central banks and monetary authorities. Reliance on borrowings from central banks has increased significantly during the period to total €23.7 billion at 31 December 2009 from €7.5 billion 2 at 30 September 2008. The decrease in customer and market balances has been driven by market wide risk aversion towards the banking sector in general, Bank specific ratings actions and reputational issues. The Bank successfully issued €7.4 billion of Government guaranteed Medium Term Notes (‘MTN’) during the period, including €5.4 billion in the latter half of 2009. This issuance more than offset the impact of maturing term deals. The Bank is a participating institution in both the Credit Institutions (Financial Support) (‘CIFS’) and the Credit Institutions (Eligible Liabilities Guarantee) (‘ELG’) Government guarantee schemes. The CIFS scheme continues to cover preexisting deposits and certain other liabilities (senior unsecured debt, asset covered securities and dated subordinated debt (Lower Tier 2)) until 29 September 2010. The Group applied to participate in the ELG scheme on 28 January 2010 and certain new qualifying deposits and securities issued by the Group from this date onwards are covered by this scheme. The presence of these Government guarantees has been a key factor in ensuring the Bank’s funding capacity. Customer funding Customer funding - €bn 31 December 2009 30 September 2008 2 Retail 14.7 17.7 Non-retail 12.5 31.0 Total 27.2 48.7 Customer funding balances account for 36% of total funding at 31 December 2009, down from 58% at 12
Anglo Irish Bank Annual Report & Accounts 2009 30 September 2008. Average total customer deposits for the 15 months to 31 December 2009 were €35.2 billion (2008: €50.1 billion). Customer accounts have decreased by €21.5 billion 2 since September 2008. The deterioration in balances was primarily as a result of disclosures early in the period that damaged the Bank’s reputation as well as adverse Bank specific ratings action in the second half of the year which negatively impacted non-retail customer sources. Retail balances have decreased by €3 billion 2 , notwithstanding a strong start to the financial period. Retail balances in Ireland have grown by €0.2 billion 2 since September 2008 but balances in the UK and the Isle of Man have declined by €2.1 billion 2 and €0.5 billion 2 respectively primarily as a result of maturing deposits and a reduced ability to price competitively in retail markets. The sale of the Group’s Austrian private banking business also resulted in the loss of €0.6 billion of retail deposits. At 31 December 2009 40% of retail balances were sourced in Ireland, 42% in the UK and 18% in the Isle of Man. Non-retail balances have decreased by €18.5 billion 2 . There has been a decline in funding from non-bank financial institutions (insurance companies, asset managers, pension funds) and more granular corporate deposits due to a reduction in corporate cash balances, banking sector risk aversion and adverse ratings action. In addition, €7.3 billion of customer deposits received from Irish Life Assurance plc over 30 September 2008 matured in early October 2008. The cost of customer funding has increased significantly in the period for both retail and corporate deposits and remains at elevated levels reflecting the intensely competitive market conditions. The Bank recognises the importance of maintaining a diverse funding platform and remains committed to growing and developing a strongly branded, geographically diversified customer deposit business. Market funding Market funding - €bn 31 December 2009 30 September 2008 2 Debt securities in issue 15.1 17.1 Deposits from banks 33.0 20.3 Total 48.1 37.4 Market funding, including borrowings from central banks, accounts for 64% of total funding, up from 42% at 30 September 2008. Debt securities in issue have decreased by €2.0 billion 2 primarily due to a decline in short term programme (commercial paper and certificates of deposit) balances of €3.5 billion 2 . MTN and covered bond balances increased by €1.5 billion 2 during the period. MTN issuance in the period totalled €7.4 billion against maturities and redemptions of €5.2 billion. €0.7 billion of the Bank’s covered bonds also matured during the period. All issuance during the period is Government guaranteed and will mature by 29 September 2010. Between April 2009 and December 2009 the Bank issued €5.4 billion of Government guaranteed notes. Of the December 2009 MTN and covered bond outstanding balances of €13.7 billion, €9.7 billion is scheduled to mature by December 2010. The overall cost of term debt has increased as new issuance is priced at higher margins than maturing amounts. Short term balances were varied during the period declining from €5.0 billion 2 at 30 September 2008 to €1.5 billion at 31 December 2009. The outstanding balances at the end of December have an average residual duration of 27 days (30 September 2008: 47 days). Deposits from banks and central banks have increased by €12.7 billion 2 to €33 billion, and represent 44% of total funding at 31 December 2009, compared to 23% at September 2008. The significant decline in customer, interbank and short term debt market funding has been offset by increased borrowings from central banks. The Bank continues to receive funding from central banks and monetary authorities under open market operations and other secured liquidity facilities. Total borrowings from central banks as at 31 December 2009 of €23.7 billion includes a special short term liquidity facility arranged through the Central Bank of Ireland in the early part of 2009. This facility stood at €11.5 billion at 31 December 2009. The interest rate on the facility is set by the Central Bank and advised at each rollover, and is currently linked to the European Central Bank marginal lending facility rate. Placements with banks and central banks have decreased by €7.8 billion 2 in the period. The total balance of €7.7 billion at 31 December 2009 includes €5.9 billion of primarily short term placements and secured repo agreements with banks, and 13
Page 1 and 2: Annual Report & Accounts 2009
Page 3 and 4: Contents Page Chairman’s statemen
Page 5 and 6: Anglo Irish Bank Annual Report & Ac
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Page 30 and 31: Report of the Directors The Directo
Page 32 and 33: Corporate governance statement On 1
Page 34 and 35: Corporate governance statement cont
Page 36 and 37: Independent Auditors' report to the
Page 38 and 39: Consolidated income statement For t
Page 40 and 41: Consolidated statement of financial
Page 42 and 43: Consolidated statement of changes i
Page 44 and 45: Statement of cash flows For the 15
Page 46 and 47: Notes to the financial statements I
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Supplementary information Consolida
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Annual Report & Accounts 2009

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