Thursday, March 31, 2011

IL&P and bonds in the covered banks

In the comments of this post we are directed to the 2010 annual report for Irish Life and Permanent (H/T Lorcan Roche Kelly via hoganmahew).  As has been speculated during the week it seems likely that the group will be broken up with Irish Life and Pensions sold and Permanent TSB nationalised.  Anyway our interest here is the holdings of bonds by IL&P in the covered six which we previously looked at here.

The latest report gives a much more detailed insight into this issue.  The report can be read here and the information we’re looking at is from page 218 which gives details of the links between IL&P and the covered banks at the 31st December 2010.

ILP Bonds

There’s a lot of change going on there!  We also know that IL&P actually held €886 million if Anglo bonds on the 30th June 2010 so it was quiet a fall to have this reduce to just €94 million at the year end.  All told the exposure of the group to bonds of the other covered banks reduced by nearly €2.2 billion during the year. 

It is not clear if the bonds matured, were redeemed or were sold on to other third parties.  It is also not clear which part of the IL&P group holds the bonds – the pensions business of Irish Life or the banking business of Permanent TSB.  Regardless, it is a reasonably positive development (although the money to repay the bonds could now be owed to the ECB) and hopefully is reflective of a general pattern across the covered six that has been them reduce their exposure to each others’ debt.

UPDATE: The 2010 Annual Report for Anglo Irish Bank was released this morning.  It can be read here.  It does not seem to provide the same detail as the IL&P report.  On page 158, though there is the following paragraph:

In addition, in the normal course of business and on arm's length terms, the Group has entered into transactions with Government-related entities, which include financial institutions in which the State has significant influence. The principal banking transactions include taking deposits, investing in Government bonds and debt securities in issue, and providing loans. At 31 December 2010 normal banking transactions outstanding between the Group and such entities amounted to: deposits of €540m (31 December 2009: €436m), Government bonds of €278m (31 December 2009: €1,118m), debt securities issued by State-owned financial institutions of €383m (31 December 2009: €232m), loans and advances to banks of €365m (31 December 2009: €356m) and customer loans of €nil (31 December 2009: €173m).

At the end of 2010, Anglo held €383 million of bonds from other “state-owned financial institutions.  Not massive, but significant nonetheless.

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