Annual Report & Accounts 2009 - Anglo Irish Bank

Business review continued
The grading of the Bank’s loan book across all sectors and
locations has been adversely impacted by the deterioration in
economic and market conditions, with a significant increase in
the amount of loans classified as impaired or as past due but
not impaired.
In the nine month period since the Bank previously reported,
impaired loans have increased from €10.7 billion as at
31 March 2009, (September 2008: €0.9 billion2 ) to
€34.6 billion as at 31 December 2009. NAMA eligible assets
represent 73% or €25.1 billion of the total impaired loans.
Specific capital provisions on NAMA eligible assets
(€35.6 billion) total €10.1 billion. This amount represents
a provision of 28% on NAMA eligible assets.
The amount of loans classified as past due but not
impaired has increased to €8.7 billion from €1.6 billion2 at
30 September 2008, reflecting the impact on business cash
flows caused by the general economic downturn. Ireland
accounts for €7.0 billion (80%) of the total past due but not
impaired amount, the UK €1.0 billion (12%), and the US
€0.7 billion (8%). Amounts past due for between 1 and 30
days total €2.5 billion. Loans past due for more than
90 days have increased to €3.8 billion from €1.0 billion2 at
30 September 2008 and represent the highest risk element
of past due. Of this total €1.9 billion is attributable to NAMA
eligible loans. A full aged analysis is included within note 51 to
the Annual Report for loans and advances to customers and
note 24 for assets held for sale.
Lower quality but not past due or impaired loans at
31 December 2009 totalled €6.2 billion. Although currently
not past due or impaired, these loans represent those which
management deems to have a high risk of deterioration.
These have increased from €2.6 billion2 at 30 September 2008,
affected by the same factors giving rise to the increase in
impaired and past due loans.
The post NAMA book has also been impacted by the
exceptionally difficult economic environment, particularly in
Ireland, which is currently experiencing a severe recession.
Tenant defaults across all sectors, but especially in retail and
leisure, have resulted in a significant amount of unoccupied
space and a decrease in rental flows available to service loans.
In addition, commercial property values have declined by
approximately 50% and any new leases are at significantly
lower rental rates. The amount of loans classified as impaired
10
on the post NAMA book amounts to €9.5 billion, 26% of the
overall portfolio. A further €4.8 billion of the post NAMA book
is past due but not impaired and €5.2 billion considered lower
quality but not past due or impaired.
Lending impairment
Income statement - lending impairment - €bn
15 Months
ended
31 December
2009
Year ended
30 September
2008
Specific charge – lending 13.9 0.2
Collective charge 0.6 0.5
Total lending impairment 14.5 0.7
% of closing loan balances 20.1% 1.0%
Balance sheet - €bn
31 December
2009
30 September
2008 2
Impaired loans 34.6 0.9
% of closing loan balances 48.0% 1.3%
Specific provision 13.8 0.3
Collective provision 1.2 0.6
Total provisions 15.0 0.9
The lending impairment charge for the period of €14.5 billion
or 20.1% of closing loan balances (charge of €724 million or
1.0% for the year ended 30 September 2008), includes
€13.9 billion of specific charges and a collective charge of
€0.6 billion. The closing balance sheet impairment provision
totals €15.0 billion. A reconciliation of opening and closing
provisions is detailed in note 27 to the Annual Report.
Impairment is calculated in accordance with IFRS and reflects
losses incurred in the period based on conditions existing at
31 December 2009. The specific charge was determined
following a detailed loan by loan assessment by Group Risk
Management, completed during the period November 2009 to
January 2010. This charge is calculated based on discounting
estimated future cash flows on loans and reflects the
substantial price reductions in development assets and land