ACC: needs cash from Rabobank

ACC Bank, the SME and property development lender, will need €400m from its Dutch parent, Rabobank, to stay afloat this year as high impairment provisions and deposit flight take their toll on the business, according to a source with knowledge of the accounts.

The source did not reveal whether the injection was for capital or liquidity purposes and the bank would not comment, saying it will report its financial performance only at its full-year results next spring.

The news comes as ACC awaits yet another judicial decision on the future of Zoe Developments, the property company owned by Liam Carroll, which the bank is seeking to liquidate over a €136m debt. On Tuesday, the Supreme Court will rule on whether ACC can proceed with the winding-up or whether Carroll can seek protection in examinership.

Last year, Rabobank put €175m in equity capital into ACC as the bank took €306m in new impairment charges on its €6.5bn loan book for 2008 as the bank lost €244m. Rabo also subscribed for €95m in subordinated debt from ACC to compensate for a 21.9% decline in deposits.

It is understood loan quality and deposit levels continued to deteriorate in 2009 in line with the rest of the banking sector, which has been reporting record bad debts and an extremely challenging environment for deposits. ACC is more exposed than most, as commercial loans represent two-thirds of total advances to customers. The €136m Carroll owes the bank indicates ACC was willing to lend very large sums relative to its capital on speculative developments.

Total regulatory capital at ACC as of the end of 2008 stood at €661m, slightly more than half of which was tier 1.

At those levels, a loss of €260m would put the bank below the minimum 4% level for tier 1, requiring a capital top-up.

ACC is not the only foreign-owned bank on parental life-support. Ulster Bank and Bank of Scotland Ireland (BoSI) have together received more than €3bn in capital from their respective parents, RBS and Lloyds. Both banks also receive liquidity support as well – a fact presented as a strength by executives.

ACC is also struggling with a large pension deficit, valued at €73.6m in the 2008 accounts. The shortfall emerged after the scheme suffered a 64.3% loss on the value of its assets – nearly twice that of the Irish managed fund in the same year.