The annual interest bill attaching to the State’s bailout of the banking sector could run to €1.7 billion a year, the Comptroller and Auditor General has estimated.
In a report yesterday, the C&AG found that the net cost of the bailout was €43 billion at the end of 2014 and estimated that the cost of servicing the debt each year would run to between €850 million and €1.7 billion.
This assumes interest rates of between 2 per cent and 4 per cent a year. This figure also includes the "imputed debt service costs" of the €20.7 billion in cash invested in AIB and Bank of Ireland by the National Pension Reserve Fund, which would otherwise have expected to achieve a return of 11 per cent a year on this money.
The C&AG said the cost of servicing the debt was €8.7 billion up to the end of 2014 with just under €4 billion of this relating to the Irish Bank Resolution Corporation.
Another €2.3 billion will be paid in servicing costs in 2015, the report said. An estimated €1.2 billion will be incurred in respect of IBRC this year, although this will be offset by income from the Central Bank as it holds most of this in government bonds.
Some €900 million will relate to AIB, which is being primed for a stock market flotation next year, with less than €200 million relating to Bank of Ireland and Permanent TSB.
Consultants got €152m
Separately, the C&AG found that €152 million had been paid to consultants by the end of last year for advice relating to the stabilisation of the banking sector.
Four groups received almost 60 per cent of this funding – Arthur Cox led the way at €33.06 million, followed by Blackrock Financial Management at €23.48 million, Ernst & Young at €20.90 million and KPMG at €13.19 million.
These fees were paid for a range of advice, including on restructuring, recapitalising and guarantees, bank stress tests, and residential mortgage arrears.
The C&AG said the net cost of bank stabilisation measures to the end of 2014 was €60 billion. The estimated value of the State’s remaining investments in AIB (99.2 per cent), Bank of Ireland (14 pre cent stake) and Permanent TSB (75 per cent) was €17 billion.
Burden of IBRC
When one is netted off the other, the cost of the bailout at the end of last year stood at €43 billion.
By the end of last year, IBRC had been the biggest financial drain on the State with a net cost of €36.1 billion. It was followed by AIB at €8.8 billion and Permanent TSB at €200 million. In the case of Bank of Ireland, a net surplus of €2 billion had been achieved by the State.
In addition, the National Asset Management Agency, which took €74 billion of par value loans off the banks from 2009 onwards, had reported accumulated losses of €126 million by the end of last year.
Nama surplus
However, Nama is projecting a surplus of up to €1 billion by the time of its wind-down.
The C&AG also found the cost of operating a dedicated banking and shareholding management unit in the Department of Finance, to manage the State’s shareholdings in the banks, came to €7.6 million between August 2011 and the end of last year. The unit employs 20 staff.
