Colin Barr

Following the money in banking, economics, and Washington

The world's dumbest banks

February 9, 2011: 6:36 AM ET

Ireland's disastrous banks continue to punch above their weight.

Anglo Irish, the third-biggest Irish bank, announced this week that it expects to post a 2010 loss of 17.6 billion euros ($24 billion). That's the fifth-biggest banking loss on record (see chart, right), and the first new entry on the list since the global meltdown of 2008.

Hanging with the wrong crowd

Joining the ranks of the biggest banking losers is an accomplishment in itself, of course, particularly now that the global run on financial institutions has ended (even if the one on the too-big-to-succeed Irish banks continues and threatens, perhaps, to spread elsewhere).

But what makes Anglo Irish's loss even more remarkable is how dinky the bank is relative to some of its neighbors on the global dumbest list. Anglo Irish is truly the little bank that couldn't.

The biggest loss belongs to Royal Bank of Scotland (RBS), which was the biggest bank in the world at the time of its $34 billion 2008 loss, with $3.86 trillion in assets. It was bailed out by the U.K. Treasury. Also on the list is Citi (C), which had $1.9 trillion in assets when it took support from the U.S. government initially valued at more than $300 billion.

And a list of the most reckless banks wouldn't be complete without a mention of Merrill Lynch, which was sold in distress to Bank of America (BAC) with $668 billion in assets just before Lehman Brothers failed, or Wachovia, which was raffled off to Wells Fargo (WFC) a couple weeks later with $764 billion worth.

Anglo Irish, by contrast, had just $118 billion of total assets at last count – which gives it an impressive negative 20% return on equity this past year. That performance is exceeded only by Fortis, which posted similarly huge losses in 2008 on an asset base only a bit bigger than Anglo Irish's.

The bad news for Irish taxpayers is that cleaning up after Anglo Irish and the other reckless, fraud-ridden Irish banks won't be cheap. The cost of propping up the banking sector has already cost the country multiple credit downgrades, and the former finance minister brought in to straighten up Anglo Irish while it is dismantled warned this week that banking industry losses could hit 100 billion euros ($136 billion) – 57% of GDP. That is not going to make recovering from the recession any easier.

"A clean banking restructuring implies the acceptance of irrecoverable losses," Anglo Irish Chairman Alan Dukes said.

The good news is that one of the guys who made out like a bandit while running into the ground, former CEO Sean FitzPatrick, has already reached this acceptance state. This after he took 80 million euros in loans from the bank without telling shareholders, then declared he had frittered it all away.

"I am very happy to put my hands up," he told the Irish Sunday Times last month. "I am very happy to apologize to all my creditors. I don't feel ashamed, but I do feel regret, very serious regret, and I am sorry that it is going to cause people losses." Talk about an understatement.

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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