Feeds:
Posts
Comments

Archive for February, 2012

This morning, the Central Bank of Ireland (CBI) has released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 31st January 2012 and shows that during the month of January 2012, deposits by ordinary households and businesses actually increased at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. The increase of €104m from €102.5bn in December 2011 to €102.6bn in January 2012 was smaller than the €1bn+ increase in December, but it nonetheless marks the second month of increases and means we are now back at deposit levels seen in July 2011, and that is in general terms, positive news. On this blog the key focus each month is on the movement in private sector deposits at the covered banks, as this is seen as a signal of banks returning to sustainable financing. Private sector deposits fell at covered banks in the past 12 months by €9bn from €112bn to €103bn, but most of that fall took place in the first six months of 2011 and the final six months has looked stable despite the ongoing crisis in the EuroZone. I think it is fair to say there are signs of stabilisation, but it would be a gross exaggeration to claim “deposits were flowing” into Irish banks.

The CBI doesn’t provide an analysis of deposits at the covered banks – about the only analysis it doesn’t provide – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits fell by €0.1bn in January after a rise of €0.6bn in December. Household deposits at all banks are now back at August 2011 levels. Total deposits from all sources in all Irish banks fell €3.8bn in January, mostly as a result of a decline in €4.3bn in deposits held by MFIs (see below for an explanation of MFIs)

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks based in the IFSC which do not service the domestic economy.

Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.

And lastly the six State-guaranteed or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank ofIreland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outside Europe)

Read Full Post »

(The new properties added in January 2012, click to enlarge)

NAMA has today published its now regular monthly list of properties subjected to foreclosure action – the list shows NAMA foreclosed properties at the end of January 2012. The full list is here, the list of new properties added is here, and you will find previous editions of the monthly list which was first launched in July 2011, here. It is hoped to have the list in an spreadsheet format shortly, available here.

You should read the full list of NAMA’s terms for accessing the lists here. But in summary, this is what you’re looking at:

(1) Real estate property subject to loans in NAMA to which receivers have been appointed. The receiver’s website is shown against each property.

(2) This is all the real estate foreclosed sorted by country, and then region.

(3) Not all of the property may be for sale.

(4) Contact the receiver with enquiries or expressions of interest in the first instance. Only pester NAMA if you’re not getting any response from the receiver and make allowances for receivers being busy with queries, particularly after a new release of foreclosed property.

(5) If you think there are mistakes on the list, contact NAMA.

According to NAMA “the list includes 35 properties which were added in January. The total number of properties now listed is 1,119 (some of which are multiple properties such as apartment blocks). The properties to which receivers were appointed during January include a mix of residential, development, commercial and agricultural assets located in both Ireland and the UK.”

Read Full Post »

It seems these days that not a week goes by without the name of some new foreign outfit hitting the domestic headlines, as international investors look to Irelandfor opportunities in the wake of the property and banking collapses. And that is to be expected with the destruction of wealth at home, and the fact we have both a property and a banking overhang – in the sense that our banks are required to “deleverage” or in simple terms sell loan-books and non-core assets. This time last year an American company called BlackRock was making headlines as it had been engaged by the Central Bank of Ireland to conduct credible stress testing of Irish banks. Before then, Blackrock was just an upmarket district of Dublin.

Another American company that has been getting a foothold in Irish business is Blackstone – both are “black” or “schwarz” in German, but it is Blackstone that is headed up by Steve Schwarzman, though I see Enda Kenny is calling him “Stephen”. You might recall Steve on here for his injudicious speech he gave in December 2010 on the opportunities in Europe – “we’re basically waiting to see how beaten up people’s psyches get” and best of all, “you want to wait until there’s really blood in the streets”. Now before we take too much umbrage at foreign investors salivating over Irish assets, let’s not forget that massive wealth has been destroyed here, the economy is at best stabilising and the banks are still weak and are not in lending mood/mode and foreign capital and investment is essentially a “good thing”.

But having said that, Blackstone’s inroads into Irish in the past year are remarkable and have gone largely unnoticed. It was in America that Blackstone made its first bid for Irish state-owned assets when it went after Anglo’s USD 8bn (€6bn) loan-book which Anglo eventually sold to Lone Star, JP Morgan Chase and Wells Fargo. In October 2011, the managing director of the Blackstone group, Tom Kelly was one of the participants invited to the Global Irish Economic Forum at Dublin castle. Another attendee at that conference was Gerry Murphy, the managing director of The Blackstone Group LP. In October also, Blackstone took over a company with Dublin links – Harbourmaster Capital is an asset management company with €8bn under its wings, and two of its directors Alan Kerr and Mark Moffat are based in Dublin, and the back-office functions of the group which employ some 40 people are expected to remain in Dublin. On 8th November 2011, An Taoiseach Enda Kenny together with Minister for Finance, Michael Noonan met with the chairman of the Blackstone group, Stephen “Steve” Schwarzman in Dublin. On 12th February, 2012 it was reported by Ronald Quinlan in the Sunday Independent that IBRC (“Irish Bank Resolution Corporation”, the resultant entity from the merger last year of Anglo and Irish Nationwide Building Society) had retained Blackstone to advise on the disposal of its remaining UK and Irish loans – worth €30bn at nominal value. And let’s not forget unconfirmed reporting that the Minister for Finance had appointed Gerry Murphy – visitor to theDublin castle conference in October last – to the new NAMA advisory board.

“Blackstone”, a name you won’t have heard much about before.

Now last week, the Minister for Finance faced a batch of questioning on state involvement with Blackstone. Minister Noonan confirmed that Blackstone may indeed bid for Anglo loans in future, and the Minister dismissed concerns about conflicts of interest claiming that IBRC had engaged an advisory division of Blackstone to advise on the disposal of its UK and Irish loan books, but it would be a completely separate division of Blackstone, the investment division, that could potentially bid for IBRC’s loans. Not only that, but the Minister has it that another company you may not have heard of, FTI Consulting, has provided “independent advice” to IBRC on the matter. And to cap it all – “my [Minister Noonan’s] officials sought assurances from the bank that no conflict of interest existed in relation to the appointment and these assurances were provided by the Chairman of the bank.”Well that’s assuaged those concerns then!

Minister Noonan declined to disclose what money IBRC is paying to Blackstone for advice on itsUKand Irish loanbooks, citing confidentiality. So we won’t know how much we, and “we” own IBRC 100%, are paying Blackstone to get advice on a sale of assets whose buyer might well be….Blackstone!

And what about Gerry Murphy’s involvement with the NAMA advisory board? Minister Noonan said “I have appointed Mr Michael Geoghegan to chair a small group of advisors to advise me on the future strategic direction of NAMA. Mr Geoghegan has agreed to carry out his role on a pro bono basis. I am currently considering the names of potential candidates who have the appropriate experience and background to work effectively on the group of advisors with Mr Geoghegan. I expect to announce the other members shortly. At that stage, I will also announce the group’s terms of reference, as well as its reporting framework and arrangements in relation to costs.”

The above is unusually obtuse language from a man who is probably the most articulate in Irish, or indeed most countries’, politics. It’s obtuse because Minister Noonan doesn’t confirm that Gerry Murphy has been appointed though he says “I expect to announce the other members shortly” and “other” refers to current or future members of the NAMA advisory board whose names are not being currently considered because presumably they have already been appointed.

Presumably Blackstone will be allowed bid for NAMA assets on the same basis as IBRC’s assets. And remember this is taking place on the watch of a political party whose 2011 Election Manifesto commitment was to do something about “the same small network of professional advisers, accountants, lawyers, financial advisers or other consultants are linked NAMA, the NTMA, the bailed-out banks, the Central Bank and the Department of Finance. This presents an obvious conflict of interest which undermines confidence in Ireland’s public and private sector governance.”

This morning the Sinn Fein leader Gerry Adams asked An Taoiseach about the potential for conflict of interest in the State’s engagement with the “vulture capitalist” Blackstone – the video of the record-short five minute question and answer is here – but Enda Kenny declined to address the matter directly claiming that disposals of Anglo’s and indeed NAMA’s assets would be subjected to the highest ethical standards and suggested Minister Noonan provide a more detailed answer. An Taoiseach did say that “sections of major groups like Blackstone are legally separated”. Hmmmm.

Read Full Post »

The case in Dublin’s Commercial Court between Treasury Holdings and NAMA, and others, continues later today for what will be Day 6 of this preliminary hearing where Treasury is now just seeking a judicial review of its dealings with NAMA, having dropped the application for an injunction against NAMA’s receivers. Yesterday the parties started their closing arguments, and Mary Carolan at the Irish Times has a good report on yesterday’s proceedings which included KBC, which is a notice party in the case, making its contribution. Meanwhile on here, most of the Treasury Holdings affidavits have been obtained and are attached as follows:

Richard Barrett (Group Managing Director, Treasury Holdings) – affidavit here
John Bruder (Managing Director, Treasury) – Part One here and Part Two here
Niall O’Buachalla (Group Finance Director, Treasury Holdings) – affidavit here
and
Michael Cragg (economist, The Brattle group) – affidavit here

So what do we learn? Not surprisingly we get a different perspective on the deals brought to NAMA. Treasury had been, and NAMA alledgedly knew since 8th November 2011 that Treasury had been, in “active and ongoing negotiations” with third party investors, though it is implied that Treasury only told NAMA the names of the investors on 10th January 2012.  Elsewhere Richard Barrett says that it will be “at least 5 years” before any bank resumes development funding in Ireland. Yikes! It is Treasury’s suspicion that NAMA’s QIF initiative indicates that the Agency has its eyes on Treasury’s assets. And any developer out there should read Part Two of John Bruder’s affidavit for a good sense of the detail of NAMA’s interaction with developers on the verge of foreclosure. There will be a separate blogpost on Michael Cragg’s affidavit.

CIM
Richard Barrett describes the CIM deal as “frustrated” and claims it was NAMA’s “inexplicable” raising of the TAIL transaction which scuppered the deal. CIM first approached Treasury in June 2010, and Treasury says that on 3rd March 2011, it received “confirmation that the NAMA board had agreed the term sheet”. On 7th March 2011 NAMA raised the TAIL transaction and demanded it be reversed and CIM subsequently cancelled meetings with Treasury but regardless CIM submitted a new offer in May 2011 after conducting due diligence, and seeing the Irish market was continuing to tank and that Fine Gael’s Alan Shatter was pursuing changes to Upward Only Rent Review leases, the revised offer was much lower.

 

Macquarie
Approached Treasury via NAMA in mid 2011. The deal was comparable with CIM’s according to Treasury given what it claims was a 20% decline in Irish property prices in the 17 months between September 2010 and January 2012. Macquarie offered NAMA 35% of the value of “the development company” but presumably that means 35% of any profit on top of what Macquarie was paying. There is a claim that NAMA was also offered 7.5% on any value realised over €1.2bn.

 

Hines
There is little new detail given on the Hines approach. The negotiations between 10-25th January 2012 are derided as no more than requests for clarifications and Treasury complains at being excluded from interaction between NAMA and Hines.

 

Battersea
Treasury had contacted 220 potential investors, according to Richard Barrett who also believes NAMA acquired the loans for Battersea at a 20% haircut. Treasury say an investment offer from SP Setia had been secured to pay “the full 100% face value” of NAMA loans – elsewhere said to be GBP 124.4m (€147m) with interest accruing daily – but that NAMA/Lloyds decision to appoint administrators in December 2011 scuppered that deal. A swipe is made at Sean Mulryan’s development in adjacentEmbassyGardensin Battersea where Treasury say they “understand that NAMA have chosen to finance an adjoining site which is (sic) less attractive development prospect”.

Treasury’s finances
Allegedly on foot of NAMA’s decision to appoint receivers, “further demands under guarantees totalling hundreds of millions of euro have been served, all of which has the potential to impact on the remainder of the group with the loss of at least 45 jobs in Dublin” (Treasury employs 400 people worldwide, of which 300 are in Ireland). NAMA’s action may impact on the Chinese operation whose assets are owned by “hundreds” of parties, but which are managed by a company owned by Treasury in Dublin. Elsewhere we get an insight into Treasury’s engagement with other creditors which are ranked according to their importance to the business and dealt with accordingly.Bizarrely it seems that as late as December 2011, Treasury had unencumbered income over which NAMA “had sought but not yet taken a charge” REO is now 50.7% owned by Treasury. The company leased or sold 400,000 sq ft of office, retail and residential space in 2011 in addition to selling the 200,000 sq ft Montevetro building in south Dublin docklands to Google.

Interaction with NAMA
Treasury expresses some frustration with NAMA’s processes eg the Agency requires a so-called “Creditor Strategy” from developers but gives no guidance as to what such strategy should contain. Treasury say that changes to their projections in Nov/Dec 2011 came about as a result of what Treasury “was told by NAMA” in respect of accruals and non NAMA debts. So the implication on the NAMA side that Treasury’s abilities caused “considerable alarm” are a “distortion” as far as Treasury is concerned. Treasury’s main beef is that NAMA decided on 6th December 2011 to pull the plug, and indeed that decision might have been committed to even before that. Yet Treasury provided their finalised creditor strategy numbers on 7th December and were given the impression subsequently that the relationship was smoothly proceeding – though not so smoothly that the NAMA CEO didn’t return calls in December. It’s NAMA’s position that the Creditor Strategy was in fact received on 18th November.

The Gossip
Treasury told NAMA in October 2011 that it would need make redundancies but NAMA refused to “deal with this issue until John Ronan repaid money to the Company which he had legitimately received as part of his remuneration” The legendary Form A used by NAMA to approve spending and which is now the stuff of developers’ night terrors are supposed to be dealt with by NAMA in two weeks but, according to Treasury, “in most cases however decisions took very substantially longer than 2 weeks and unfortunately in many cases decisions were never forthcoming despite Form A’s having been submitted as long ago as June 2011”. And in one case, a payment to a supplier, Treasury recently took the decision to pay an invoice without NAMA’s consent because of the time it alleges it takes NAMA to deal with Form As.

The Courts.ie service indicates that affidavits were filed by each of the following, but there are not yet available on here.

DAMIEN REVILLE (IBRC)
EDWARD DILLON (KBC)
DENISE BUCKLEY
RORY WILLIAMS (General Counsel, Treasury group)

And where is, you might ask, the affidavit for the colourful Johnny Ronan? There isn’t one, and you’ll recall that Johnny stepped down from Treasury Holdings in 2010 after his tabloid antics made the headlines. Having said that, he attended what seems like a crucial meeting with NAMA on 8th November 2011 along with Richard Barrett.

I leave you with Richard Barrett’s concluding statement in his affidavit : “Given our impeccable behaviour towards them, the early support and encouragement and my refusal to aid disgruntled NAMA debtors, I would have expected respect and a willingness to proceed and negotiate in a straightforward fashion”

Read Full Post »

It was May 2011 when the NAMA chairman and the NAMA CEO first mooted the proposal that NAMA would introduce a scheme which would allow it to sell residential property in Ireland with built-in protection against future price falls. The product was to be unveiled in Autumn 2011, then that slipped to Q4,2011 and the latest from the NAMA chairman is that it is expected to be launched at the end of March/start of April 2012 after receiving European Commission approval, largely with respect to competition issues.

In response to an enquiry asking for information from the Commission on the details of the NAMA scheme, the European Commission last week refused to disclose any NAMA documentation, on confidentiality grounds. The letter from the Commission – available here – states that NAMA did submit documentation in December 2011 and January 2012, which begs the question why it took so long – seven months after the first announcement in May 2011 – for NAMA to get around to seeking Commission approval. Furthermore the letter confirms that the Commission was still considering the NAMA proposal on 22nd February, 2012.

The enquiry was from an individual named Richard Ryan – nothing to do with this blog – and was made through the useful service asktheEU.org which allows citizens to seek information from EU organisations, including the ECB, with the website sending the request to the appropriate contact at the organisation, citing the law under which the information is sought. The refusal to provide the NAMA documentation may be appealed.

NAMA’s negative equity mortgage – referred to as a “Deferred Consideration Initiative” by the Commission – is controversial and has sparked concerns domestically that NAMA may get a competitive advantage in shifting its portfolio of underlying security in 10,000 residential properties.

Read Full Post »

This morning’s house price statistics from the Central Statistics Office show that house prices nationally are continuing to decline, and in fact have declined by each of the last 52 months – months, not weeks, though in June and July 2010 the index did remain flat. In not one month since September 2007 have prices nationally risen. And there is a body of opinion which says that Irelandhas so many supports and distortions in place in the property market that what we are seeing is a torturously long-drawn out adjustment to prices. Whilst none of us has a crystal ball, I would say the consensus is that house prices will continue to fall for some time, maybe a year, maybe two to three. According to the DAFT.ie 2012 Consumere Attitudes Survey , most people think prices have a ways to fall with more than 90% thinking that prices in five years time will be lower than today.

So faced with the old dilemma of rent versus buy, we show here today two properties in Dublin. The first property, a 620 sq ft home in excellent condition is for sale and its asking price of €199,000 is close to the average price for a Dublin home indicated by the CSO indices, that is €194,918 in December 2011, using the Permanent TSB/ESRI peak prices and applying the % decline from peak recorded by the CSO. If you had bought this property in December 2011, then according to the CSO the average price of a Dublin house fell by 4.1% which equates to €8,159 in the case of a €199,000 home and assuming you are paying 3.5% net annual interest on a 100% mortgage, you would have seen your wealth decrease by a total of €8,739.

The second property is for rent at €7,000 per month. This is the highest asking price in south Dublin city. You get a five bedroom furnished top spec home at one of Dublin’s best addresses.

Whilst the experience of one month isn’t necessarily probative of subsequent months price changes, it does show in a snapshot the disparity between renting and buying, and suggests renting provides better value for money. You should also bear in mind that individual properties and individual transactions may not be reflective of the market in general.

Read Full Post »

This morning has seen the publication of the CSO residential property price indices for Ireland for January 2012. Here’s the summary showing the indices at their peak (various months in 2007 depending on type of property and location), the NAMA valuation date (November 2009), annual (December 2011), last month (December 2011) and January 2012

Now that the Permanent TSB/ESRI has abandoned its quarterly house price index, the CSO’s isIreland’s premier index for mortgage-based transactions. It analyses mortgage transactions at eight financial institutions : Allied Irish Banks, Bank of Ireland, ICS Building Society (part of the Bank ofIrelandgroup), the Educational Building Society, Permanent TSB, Belgian-owned KBC, Danish-owned National Irish Bank and Irish Nationwide Building Society. The index is hedonic in the sense it firstly groups transactions on a like-for-like basis (location, property type, floor area, number of bedrooms, new or old and first-time buyer or not) and then assigns weightings to each group dependent on their value to the total value of all transactions. The index is an average of three-month rolling transactions.

Cash transactions: there is increasing concern that although the CSO captures data from the mortgage market, it omits cash transactions. The latest figures from the Revenue Commissioners are for 2009 which show that just 6% of transactions (by volume) were in cash. Last week, estate agents DNG claimed that cash made up one third of the market. At the start of January 2012, Sherry FitzGerald said that 29% of its registered buyers were cash buyers, and mortgage expert Karl Deeter said on here that “what Mark Fitzgerald [of Sherry FitzGerald] said at the AIB meeting in December (we were at the same table) is that 30% of purchases were cash – I’d take that as being completions unless this is a case of crossed wires”. In addition, the Sunday Independent reported the former acting CEO of the Irish Auctioneers and Valuers Institute saying that “I would say a quarter of deals at present are being done in cash”. The Allsop Space auctions won’t be representative of the general market but the latest analysis from it says that almost three quarters of its auction transactions were in cash. The CSO expects to have monthly data from the Revenue Commissioners from mid-2012 and it expects that it may subsequently be able to show the market size with its monthly release of the residential index. The perception is that cash transactions will be at keener prices than mortgage transactions because the buyer can move quickly and doesn’t need credit. If that perception is correct then the CSO may be understating – and potentially, understating substantially – the decline in prices.

As for the key questions:

How much does property now cost in Ireland? The CSO deliberately doesn’t produce average prices. The former PTSB/ESRI index did, and claimed the average price of a property nationally hit the peak in February 2007 at €313,998, inDublin in April 2007 at €431,016 and outsideDublin in January 2007 at €267,987. If, and it is a big “if”, you were to take PTSB/ESRI figures as sound and comparable to the CSO series, then these would be the average prices today:

Nationally, €162,653 (peak €313,998)

In Dublin, €186,827 (peak €431,016)

Outside Dublin, €151,471 (peak €267,987)

I don’t think the CSO would be happy with this approach but it seems to me that the PTSB/ESRI series as represented by its historical indices closely correlates with the performance of the CSO indices.

What’s surprising about the latest release? Apartment prices nationally were down 4.3% in the month of January 2012. Prices inDublin took a battering again, with house prices down 4.1% in the month and apartment prices down 3.5%. Price drops outsideDublin continue to be more modest, with non-Dublin houses down by just 42.7% compared withDublin houses of 55.4%.

 Are prices still falling? Yes, and the 1.9% monthly decline nationally in January 2012 is up from the 1.7% decline in December 2011 and 1.5% decline in November  2011 but in the same range as the 2.2% decline in October 2011, the 1.5% decline in September 2011 and the 1.6% decline in August 2011.

How far off the peak are we? Nationally 48.2% (49.8% in real terms as inflation has increased by 3.2% between February 2007 and January 2012). Interestingly, as revealed here,Northern Ireland is some 45.2% from peak in nominal terms and 52.6% off peak in real terms. Are forbearance measures by mortgage lenders, a draconian bankruptcy regime and NAMA’s (in)actions distorting the market? Or are cash transactions which are not captured by the CSO index so significant today that if they were captured, the decline in the Republic would be even greater?

How much further will prices drop? Indeed, will prices continue to drop at all? Who knows, I would say the general consensus is that prices will continue to drop. You might find the DAFT.ie 2012 Consumer Attitudes Survey published today of interest though its scientific accuracy is questionable. This is what I believe to be a comprehensive list of forecasts and projections for Irish residential property [house price projections in Ireland are contentious for obvious reasons and the following is understood to be a comprehensive list of projections but please drop me a line if you think there are any omissions].

What does this morning’s news mean for NAMA? The CSO index is used to calculate the NWL Index shown at the top of this page which aims to provide a composite reflection of price movements in NAMA’s key markets since 30th November 2009, the NAMA valuation date. Residential prices are now down 28% from November, 2009.  The latest results from the CSO bring the index to 828 (20.7%) meaning that NAMA will need see a blended average increase of 20.7% in its various property markets to break even at a gross profit level.

The CSO index is a monthly residential property price index. Ireland does not yet have a publicly available register of actual sale prices, but one is expected in mid-2012 following the passing of legislation last year – read the latest on the House Price Register here. There are three other residential price surveys, based on advertised asking prices or agent valuations – for the latest see here. Lastly the Department of the Environment, Community and Local Government produces an index based on mortgage transactions, six months after the period end and not hedonically analysed, it is next to useless.

Read Full Post »

Older Posts »

Follow

Get every new post delivered to your Inbox.

Join 10,062 other followers