Lenihan on NAMA – Impossible to make a detailed assessment due to inadequate published data

Impossible to make a detailed assessment due to inadequate published data

The average discount on Black NAMA Tuesday loans was 47%

This is a big improvement on the 30+% original discount intention by the government (December 4th Comment) which would have disguised the extent of the loan catastrophe in the banks but is it enough?

Land Prices

Land prices have fallen by >80% from peak. 15% of loans in this first segment of the loans transfer involved land.

Investment properties

Investment properties have fallen by 50 to 80% deduced by evidence from the commercial courts. 65% of the loans in the first tranche are investment property loans.

Hotels

Hotels have plummeted in value and the market is supersaturated in beds.
9% of first tranche are hotel loans. Have these fallen by a lot less than 40% because otherwise the numbers do not stack up.

First Tranche of NAMA Loans

Book value – €16 billion.  State pays €8.5 billion at a discount of 47%.

Example of why Lenihan is again wrong.

Take 100 units as the bank book value

The supplementary documentation to the Minister for Finance statement on banking on 30th March states that in the first tranche of NAMA purchases, 58% were located in the Republic of Ireland, 38% in Britain (not NI) and 4% elsewhere.

15 units bought by NAMA involve land. Let us give best case scenario. Value down  by 80%. That is value now = to 3 units ie 20%

Now look at the 65 units transferred to NAMA from investment properties – Let us assume that the value has fallen only by 50% and not 80%. That leaves the NAMA with 32.5 units now from the investment properties.

11 units (6% development property >30% completed + 5% residential property for resale) are other property loans some in England where the fall has been minimal. So let’s say that the 11 units are now worth 7 units.

Finally Hotels 9 units were transferred – say 50% discount on book value leaving NAMA with 4.5 units now.

Of first tranche, the government is likely to have 47 units out of 100 left. This is assuming the higher values for the assets in the range of property devaluations in the various sectors.

This guesstimate is at the 47% real payment from NAMA to the banks.
However, this ignores falling property prices since the 30th November 2009 and also the likely 10% further decrease for 2010. There is no reduction for bulk buying of asset garbage for the public so we (you and me – all of
us) are paying too much.

If you extrapolate to the NAMA language, the discount in my calculations is 53%. That is a conservative discount so that is why I say that Lenihan is wrong again. The conservative gap here is 7% – which in money terms is
€1.12 billion. Just think of the misery of the €1.4 billion or less pay-cuts on the public service and it puts things in perspective..

The deal done is better than the deal that was publicised in early November when the NAMA bill became law.

Information Vacuum

Without a list of the individual properties with book values and discounts, it is impossible to make a detailed assessment of the value-for-the–taxpayer of the transfers because the numbers and discounts are given in aggregates for each institution.

AIB   Book value 433.29 billions – discount 43% – Payment €1.88 billions
Anglo Irish Book value €10 billion – discount 50% – payment €5 billions Bank of Ireland Book value €1.93 billions – discount 35% – payment €1.26 billion Irish Nationwide – Book value €670 millions – discount 58% – payment €280 millions EBS – Book value €140 million – discount 37% – payment €90 millions

The payments were made in exchangeable securities.

The total were – €16 billions; securities paid €8.5 billions; discount €7.5 billions And the percentage discount was 47%.

Updated Capital targets for the banks

The regulator has set a Core tier 1 capital target of 8% for the banks

The equity capital ratio has been set at 7% which must be met by end of 2010.

AIB will need €7.396 billions by end of 2010. The tier 1 target is €4.8 billion

BoI will need €2.66 billion in equity capital

EBS €875 million

Anglo Irish needs €8.3 billion as an interim measure and another €10 billion in future!!!

Irish Nationwide €2.6 billion

Result

– AIB majority share with government

–BoI minority share with government

– Anglo Irish, EBS and Irish Nationwide Nationalised