Interim Report 2008 (PDF, 257KB) - Anglo Irish Bank

Loans are individually presented and approved at central credit committee in Dublin,
chaired independently by Group Risk Management. This team also undertakes a
complete on-site review of all loans at least twice a year, stress testing each and
every client on a loan-by-loan basis to assess the impact of increased interest rates
and lower cash flows. The most recent review of the Bank’s loan book, completed in
April 2008, confirmed that overall client equity and liquidity streams continue to be
strong and well diversified.
The Bank’s low loss outcome in the event of a default is further underpinned by
personal guarantees and by the fact that close to 100% of the loan book is secured
by a first legal charge on tangible assets, typically on a cross-collateralised basis.
Consistent and proactive management of our asset base, from initial underwriting
and throughout the life of each loan, ensures that we are close to our clients. As a
result, potential issues are recognised and dealt with at an early stage, thereby
mitigating risk. We remain vigilant to ensure the quality of our assets.
Lending – Ireland
At the end of March 2008 loans to Irish customers stood at €40.6 billion, up
€3.7 billion 3 in the first six months. Customer activity has centred primarily on Irish
and mainland European markets.
Price reductions and a significant decline in the supply of new homes have helped
provide some stability to the Irish residential market. The development component of
our Irish residential activities continues to perform well under difficult market
conditions. Typically, our clients’ developments are substantially pre-sold and loan
facilities are cross-collateralised with other income producing assets. Most of our
clients operating in this area are long-established, experienced developers with
significant net worth who have diversified their business interests over the past
number of years, both in Ireland and internationally. Reflecting current market
conditions, there are a limited number of smaller relationships which require more
active monitoring.
The commercial property sector in Ireland is performing solidly with stable rents and
low vacancy rates. As expected, new investment activity has moderated considerably
from the record levels of 2007.
Growth in the Irish economy, whilst positive, has slowed. However, many of the
fundamentals remain sound with consensus forecasts indicating a gradual pick-up in
2009. This follows many years of significant wealth generation for our clients. We are
well positioned to create further value with them over time.
Lending – UK
The Bank’s UK lending business increased loan balances by 5% 3 to €20.1 billion.
This performance reflects general business conditions in the UK market where
activity levels have reduced significantly as buyers encounter a backdrop of more
restricted funding opportunities and sellers have been reluctant to trade assets at
lower levels.