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[cat100] 02/3/2010 08:42

By Emmet Oliver Deputy Business Editor


Tuesday March 02 2010

A GREEK poker player who liked to call himself 'the Don' and who moved in the moneyed circles of London and Monaco could yet prove to be one of the most dangerous customers AIB has ever had on its books.

Achilleas Kallakis, original name Stefanos Kollakis, was yesterday charged with two counts of conspiracy to defraud, 13 counts of forgery, five counts of fraud by false representation, two counts of money laundering and one count of obtaining a money transfer by deception. The alleged victim is Ireland's largest bank, AIB.

According to the UK Serious Fraud Office, the agency prosecuting Mr Kallakis, AIB lent money to him for five years to purchase a blue chip property portfolio.

This portfolio was purchased from some of the most senior players in British business, including the proprietors of the 'Daily Telegraph', the Barclay Brothers and private equity kings, the Reuben Brothers.

Mr Kallakis and another man, Alexander Williams, were remanded on bail yesterday until May 4.

That is probably of some relief to AIB, which must be starting to feel some embarrassment at having maintained a commercial arrangement for so long with a man facing such serious charges. In mitigation, Bank of Scotland also had a relationship with Mr Kallakis.

In 2008, according to the Serious Fraud Office account of the case, AIB grew concerned about the security that underpinned the Kallakis property empire.

Following an internal review it emerged that certain lease payments were not guaranteed as had been promised. The guarantees were allegedly fraudulent.

AIB referred the matter to the authorities and took control of the properties. The vast majority of them were later sold to Green Property, the Irish development company, with loan finance coming from AIB itself.

Once regarded as a consummate dealmaker, Mr Kallakis was a compulsive poker player and details of his winnings are still listed on the internet.

Mr Kallakis was a member of some of Britain's most exclusive social clubs and as recently as two years ago he was developing the world's most expensive penthouse apartment in St James's Square.

Dangers

The Kallakis case could pose great dangers to AIB. If it goes to a full hearing and evidence is produced by the Serious Fraud Office showing how the Kallakis deals were structured, it could shine an unwelcome light (from AIB's point of view) on the kind of controls that operate at AIB as to commercial property lending.

The loans provided to the Greek man were sizeable by any standard and took place over a five-year period. No other bank built up the level of exposure to Mr Kallakis as AIB.

The other threat to AIB's reputation arises because AIB's new boss Colm Doherty ran the capital markets division over recent years, which incorporates corporate banking -- the unit that would have dealt with the Kallakis loans.

Nobody is suggesting that Mr Doherty had any knowledge of the problems with these loans, but any flaws highlighted in this division and how it operated may dent his reputation at a time when he is still trying to establish himself in his new post.

Today is Mr Doherty's first public appearance as the bank's managing director. The charging this week of Mr Kallakis couldn't have come at a worse time for the bank.

[crosswire] 02/3/2010 08:32

Market likes results....

Wait till yanks take share price higher this pm.....

[ch1ck] 02/3/2010 07:52

Results are out and make dire reading. However there is a positive slant to the results and that is the loss is relativly small at 2656 Million and Tier one provisions are 10.2%.

Compared to some other Irish banks this looks strong and still remains a posible target for takover.

This being said I expect this to tank this week.

[lbo] 01/3/2010 22:23

Economics 01/03/2010: AIB, Nama & tomorrow's numbers
Posted by Dr. Constantin Gurdgiev


From the Dolmen guys - today's preview of AIB results announcement tomorrow -

"We expect operating income of €2bn for the year, impacted by lack of demand for credit by Irish consumers and lower Net Interest Margins (NIM). Due to a pre-tax loss of €2.7bn, equity tier 1 of the group will move down to 5%. Overall, the market will be looking for guidance on NAMA, capital raise and credit quality in the non-NAMA loan book. It is also likely the group will announce an exchange offer on its Lower Tier 2 debt."

Note the figure of 5% Tier 1. Internationally (e.g. UK) target is for 8%+ Tier 1, for banks with Loan-to-Deposits (LTD) ratios in excess of 100%. AIB's latest accounts I have access to show LTD ratio of over 150%. This means that the AIB will be on the hook for up to Euro 4 billion in order to plug in the Tier 1 capital gap with its international peers. And this is before the expected loans losses of Euro 5-5.3 billion expected in the tomorrow's announcement. So on the net, H1 2010 demand for funding should be around €3.8-4.5 billion before Nama kicks in and before provisions for a new batch of bad loans...

This is more than 3 times the current market capitalization of the bank!

[lbo] 01/3/2010 21:39

The extent to which senior officers in AIB were themselves caught up in the Irish property bubble is becoming more apparent as the months pass

PUBLIC FILINGS have shown that two senior executives of AIB, Tommy Hopkins and John Hughes, were long-term property market players who continued to invest right through the height of the boom.

[lbo] 01/3/2010 21:34

AIB is expected to post a loss of about €2.7 billion for 2009 after making provisions of €5.2 billion to cover loan losses for the year.


AIB out of switcher mortgage business





A survey published this morning indicates that banks have refused more than half the number of requests for loans and overdrafts in the past three months.

[keelingr] 01/3/2010 12:28

Once below the €1 mark - panic will set in amongst the very large % of retail investors - with bad results tmrw - expect to see 50-60c by week end...

[crosswire] 01/3/2010 11:27

Looks like market expecting bad results... better off buying GFRM.

[caveat_emptor] 01/3/2010 08:10

Tell me why ALL five brokers in Dublin are BUY with the only one
above neutral on outperfrom being Davy.

I have my grand bet at 12-1 laid that these two will not only merge,
but will be frogmarched to the altar by the Germans on the EC panel!!!

[crosswire] 28/2/2010 09:26

LBO

Do you reckon the results will be better then anylyst expectations??

[lbo] 27/2/2010 16:52

Homes are where the headaches are



Struggling households need a Nama for distressed home loans

[lbo] 27/2/2010 16:35

Banks may get less for their loans



NAMA will purchase them at a discounted price of €54 billion, but the individual transfers will be subject to approval by the Commission, because the transactions are seen as state aid, with the taxpayer bailing out the banks.

"This is an important step towards the overall restructuring of the sector and its return to a normal and responsible functioning of the market," he said in a statement.

The Commission made a number of changes to the Government's original proposal for the country's "bad bank", Finance Minister Brian Lenihan acknowledged when he welcomed the approval of NAMA

One of the changes is that the Commission insisted on the banks being charged a higher percentage than the Government proposed, to take into account theenforcement costs such as legal and administration charges for buying and selling property involved.

"We want to ensure fair burden-sharing between the banks and the taxpayer," a Commission spokesperson said

[crosswire] 26/2/2010 16:58

NAMA receives European approval

February 26 2010


The European Commission has approved the National Asset Management Agency proposal which, it says, conforms to EU state aid rules.

Joaquin Almunia, European Competition Commissioner believes that NAMA is central to a clean-up of Irish banks' balance sheets.



The clouds may be clearing from over the Irish banking sector, but as Joan Burton warns we're not out of the woods yet.

The five institutions involved in the scheme are Anglo Irish Bank, AIB Group, Bank of Ireland, Irish Nationwide and Educational Building Society.

Ahead of the anticipated approval, Bank of Ireland and AIB shares fell to below €1 in early trade.

Shares in AIB were trading at 95c, a fall of 2.6%, and Bank of Ireland shares were down 2.8% to 98c.

Shares in the banks were also affected by the announcement of Lloyds results.

Finance Minister, Brian Lenihan has said that he expects the transfer of loans by the end of March.

There was initial consternation in Europe when Ireland introduced the bank guarantee without consulting its EU neighbours, however, latterly the Government has worked in close consultation with the European Commission.

NAMA, though, is only one part of a larger plan to fix the banking system.

Trimming excess capacity, providing more money to insulate against bad loans and a substantial restructuring are next on the agenda.

Labour spokesperson on finance, Joan Burton was unsurprised that the EU Commission had accepted NAMA, given Mr Almunia's record of supporting the scheme and that it was the only proposal put forward by the Irish government.

However, she was quick to pour cold water on any suggestion that NAMA had remedied Ireland's economic woes.

Deputy Burton emphasised that those involved in the scheme must take steps to ensure the valuation process doesn't leave taxpayers exposed to billions in losses.

She also stressed that the cost of resolving the banking crisis must be kept to a minimum, amid reports that the total cost of NAMA was approaching €60bn, significantly more than was expected.

Ms Burton also had censorious words for commercial landlords who she believes are "living in a NAMA fantasy world." By maintaining the pattern of upward review of rent charges, she said, they were putting many small companies out of business.

She warned that should NAMA provide an artificial floor for commercial rents, the burden of restoring competitiveness would be pushed onto ordinary workers through wage cuts and tax hikes.

Ms Burton concluded, "The government must act immediately to end upwards-only rent reviews to give the market a dose of reality, keep more businesses open and stem the rising tide of job losses."

[crosswire] 26/2/2010 16:47

AIB

Bouncing back NYSE!

[caveat_emptor] 26/2/2010 11:12

Nama approved as expected!

80 - 54 = 33%

[crosswire] 26/2/2010 09:42

O/T

GFRM

Galiform results out next week.....

"It is now expected that profit before tax for the year will be comfortably above the top end of the current range of market expectations."

[crockanure8] 24/2/2010 10:55

aib dividend from m & t 22 million @70 cent usa money....announced yeaterday...

[lbo] 24/2/2010 09:35

Thousands at risk of rate hikes as AIB bars mortgage switchers

[lbo] 24/2/2010 09:19

Fitch Ratings today warned that the September 2010 expiry of Irish government guarantees for certain obligations of Irish banks may have a negative rating impact on certain bonds issued by the banks here.

[mountpleasant] 23/2/2010 11:20

The media love a bit of that. Reporting a 6% collapse in irish bank share prices on news last night. And some poor widow losing her 6M house in Foxrock is front page news in Indo today. Irresponsible reporting, its like stopping to look at a road accident.

[keelingr] 23/2/2010 11:13

Looks like sub-€1 is coming very shortly and below that level, panic will set in...

[lbo] 22/2/2010 22:00

Banks have been accused of being irresponsible in issuing credit cards as they racked up losses of almost €23m in the year.

More than €1,280 is owed on each of the 2.3 million credit cards in Ireland as consumers are unable to pay their bills

[lbo] 19/2/2010 15:56

HOPES that Allied Irish Banks is on the cusp of selling its stake in M&T Bank have been dealt a blow by news that the US bank's top board member has sold almost $4m worth of stock in the group.

Company insiders cannot sell shares if they are in possession of market-moving information