A summary of Anglo’s last results and position/exposure below…
The business bank’s pre-tax profit jumped 46pc to €1.24bn in the year to the end of September, with underlying earnings per share (EPS) rising 41pc to 131.7c to beat market expectations and its own guidance by 2.7c. It forecast EPS growth of over 15pc for the current year.
Anglo wrote down €112m of its €413m investments in structured investment vehicles (SIVs) and asset-backed securities with some exposure to the US subprime market. The group has €96.7bn of assets.
“This was an extremely prudent measure. We will not have to be discussing these again in 2008,” said group chief executive David Drumm.
On the funding side, Anglo said its customer deposit book jumped 46pc to €52.7m. This accounts for 63pc of the capital Anglo uses to fund lending, with the remainder made up of wholesale funding.
The group said it has been taking in €700m a month in new deposits since the onset of the credit crunch in August, compared to about €500m a month about six months ago, said finance director Willie McAteer.
This served to stem speculation in some quarters of the market that it has been losing deposits in recent months.
Anglo’s work in progress (WIP), a closely watched measure of loans which have been agreed but not yet drawn down, stood at €9.8bn at the end of September.
Goodbody Stockbrokers analyst Eamonn Hughes said he had been expecting WIP to be at the €10.5bn level.
“Gross new lending was also behind expectations,” said Mr Hughes.
Analysts were relieved, however, that the bank is managing to pass on its own rising funding costs to borrowers – keeping its net interest margin close to 2pc – rather than lend aggressively and cheaply into a weakening property market. Anglo said margins should remain stable or rise in its current year.
The group took a €51m charge on bad loans, equivalent to 0.9pc of its average loan book. It had total provisions of €295m covering €335m of impaired loans, where repayments are at least two months behind.
“Taking the collateral held on these loans into account leaves us covered to the tune of about 300pc,” said Mr Drumm.
Anglo sees the underlying Irish economy growing 3pc next year despite a continuation of the slowing housing construction market.
It expects house completions falling from 90,000 units in 2006 to 75,000 this year and 50,000 in 2008.
“Supply has just been ripped out of the market (by developers). The lower it goes the quicker the market will recover,” said Mr Drumm, adding that rising rental yields in Ireland show ongoing demand for housing.