It will be next Thursday 26th July 2012 when NAMA will publish its annual report and audited accounts for 2011, and we’re all looking forward to that. Today, NAMA’s parent organisation, the National Treasury Management Agency (NTMA) published its own annual report for 2011. The NTMA has a range of functions but principal among them is management of the national debt, and most observers would say that it has been on cruise-control since the Troika bailout in November 2010 with permission slips needed from the EU, ECB and IMF if the country wants to even take a bathroom break. The NTMA however would have you believe that it has been a hotbed of activity in 2011, trying to convince Arabs, Sikhs and Jesus freaks to invest in Irish bonds as the country plots a return to the traditional bond markets in the next 18 months. How well the NTMA has made new friends remains to be seen
A separate annual report was published this morning for the National Pension Reserve Fund (NPRF) which was originally intended to provide a temporary rainy day fund until it would be deployed in the third decade of this century to fund pensions. As it happens, the NPRF was raided to bail-out two of the banks, AIB and Bank of Ireland, and there will be intensive focus on the NPRF in coming months as Ireland is expected to try to get the European bailout fund, the ESM, to buy our stakes in these two banks. Despite pumping €25bn into both banks, the NPRF is valuing those stakes at €8bn today (see table below). I have just ploughed through over 200 pages in the two annual reports, and can say that the only detail is that the NPRF engaged Goodbody Corporate Finance to value the stakes and the NPRF used the “advice” of Goodbody to arrive at its own valuation. There is absolutely NO DETAIL WHATSOEVER on how Goodbody valued the preference shares in AIB and Bank of Ireland which comprises 90% of the €8bn valuation shown in the accounts – Note 10 in the NPRF’s accounts on PDF page 60 details the history of the AIB/BofI shareholdings. Yet there are scores of pages given over to the most mundane trivia.
Another sinister omission is any detail of the rocketing legal and consultancy fees incurred by the NTMA of €36m in 2011, and there is reference to a €14m legal settlement without more detail being provided.
For the NAMA audience, we learn the Agency now has 214 employees, that NAMA’s John Mulcahy is advising the NPRF on its property investments, the NPRF has €507m of property investments and last year they returned 9%. A measly €51m of property investment is in Ireland. Remember Northwood may be earning 20% per annum on its first Irish property purchase at One Warrington Place, yet the NPRF seems to be giving Irish property a wide berth. If NAMA is so confident in the “stabilisation” of Irish property, how come its John Mulcahy is not able to steer the NPRF’s investments towards domestic shores?
It’s like poking a caged, starved mutt with a stick, but since we’re three days before the Sunday Independent can serve up another smorgasbord of rage-inducing fare, I’ll leave you with the NTMA CEO’s rewards for last year – €490,000 basic plus nearly €29,000 for car and health. And his pension? Who knows, all the accounts say is “The Chief Executive’s pension entitlements are within the standard entitlements in the model public sector defined benefit superannuation scheme” ! John did waive any bonus that might have been payable in 2011 and his deal provides for a bonus of up to 80% of salary, and it should be said that John has agreed to waive 15% of his salary for one year in 2012.
@NWL
“Despite pumping €25bn into both banks, the NPRF is valuing those stakes at €8bn today (see table below).”
Stop me if I am wrong (been trying to tot it up) but the gross cost of NPRF investments in AIB and BoI was 21bn rather than 25bn.
http://www.nprf.ie/Publications/2012/NPRFReport2011.pdf
Page 11 bottom table.
@Rob S, we’ve pumped €25.4bn into AIB/EBS and Bank of Ireland
http://www.kildarestreet.com/wrans/?id=2012-04-26.961.0
Some of it came from the Exchequer, rather than NPRF but the point stands, what has cost us €25.4bn is now worth – according to the NPRF interpretation of advice from Goodbody – €8bn.
@NWL
Fair enough.
Really get a headache trying to cource all these bloody recaps.
Point stands indeed.
Off-topic : @NWL, is there any indication when 2011 NAMA Annual Report will be published?
@Gerhard, for feck’s sake, the answer to your question isn’t exactly cleverly concealed in the above blogpost!
Sorry (blush)!
The first line in your post too.
I’m off to Specsavers..
Gosh poor old John,getting a bit long in the tooth for all this responsibility.
“Mr. Mulcahy is a chartered surveyor and has worked in all aspects of the property industry for over 40 years, most recently concentrating on property investment and asset management.”
http://www.nama.ie/about-us/management/
Do they have mandatory retirement age at that place,the old skill set must be getting a bit rusty after 40 years off it!
Apologies,have not have time to read the report today,but was there any mention of extra renumeration for all this additional responsibility,specifically as he’s nearing retirement age after yep 40 years of it!
@John, that’s very ageist. I believe John gave his age as 62 in the London case with Paddy McKillen, where incidentally he was sublime on the witness stand. And no, there is no mention of extra remuneration for his role at the NPRF.
@NWL ah now 62,maybe he’s a crossword whiz,or addicted to caffeine which apparently slows the MEDICALLY proven,decline in memory and cognitive functioning as one ages.
“Many of the cognitive deficits of normal ageing (forgetfulness, distractibility, inflexibility and impaired executive functions) involve prefrontal cortex (PFC) dysfunction..”
http://www.nature.com/nature/journal/v476/n7359/full/nature10243.html
Must have missed the ad for this new job/responsibility,but knowing the NTMA culture it was another inside job,his old resume a bit thin on pension fund advisory.Ah well I suppose its never too late to teach a old dog a new trick!
Should be retiring shortly,or at least getting ready for it,a bit odd to have a oul fella in his mid 60′s rattling about the place,or this a retirement home for the great and the good.Does NAMA/NTMA not have mandatory retirement at 65 ?
I’m sorry, but this and a nod to reality means it should be written in Sindarin.
@Vince enjoyed the Tolkien reference,it’s me having a bit of fun at John Mulcahy’s age,x Jones Lang.Speaking of expense unlikely,he’s hanging around for the money,what with his stock in JL and all that !
From post above,apologies if too obtuse.
“For the NAMA audience, we learn the Agency now has 214 employees, that NAMA’s John Mulcahy is advising the NPRF on its property investments, the NPRF has €507m of property investments and last year they returned 9%. A measly €51m of property investment is in Ireland…”
Will check later,but it would be too funny if JL was the valuer for NPRF,no idea but would not be too surprising.
The largest investment in Irish real estate is in IPUT.
http://www.nprf.ie/Publications/2012/NPRFReport2011.pdf
And yep guessed rite,who do you think does the valuations ?
“From 1967 to 2004 Jones Lang LaSalle acted as consultant surveyor, property manager and valuer and advised in the acquisition of a number of properties for the Trust. From January 2005 Jones Lang LaSalle’s role is valuer, property manager for multi-let properties and agent for specific agency and investment instructions.”
Small little world!
http://www.iput.ie/uploads/documents/reports/IPUT_Annual_Report_2011.pdf
@NWL
The directors of AIB show a book value for the bank of €14.4 billion at December 2011. One assumes its auditors KPMG concur.
Why then did the NTMA on the advice of Goodbody’s say that the State’s98% share was worth only €6 billion.
Is AIB lying? Does the NTMA believe AIB accounts to be rubbish?
How does the Minister view a situation whereby the directors of a bank in which he owns 98% show a book value of the bank at >€14billion, but the NTMA that reports to him, does not believe a bloody word of it and puts the book value of the bank at €6billion.
@Joseph, without looking at the detail of AIB’s accounts at 31 Dec 2011, I would say the difference is down to methods of valuation. Remember the difference between fair values and carrying values?
http://namawinelake.wordpress.com/2012/06/11/2011-annual-reports-for-irish-banks-reveal-potentially-catastrophic-losses-and-additional-bailouts-requirements/
There are also differences in how you would value a company as a going concern and how you would value it with the prospect of an immediate sale. So you can have two very different valuations on assets, be they loans or entire companies.
I would GUESS the advice from Goodbody on which the NPRF based its values on was on the basis of an imminent disposal, but there is practically no detail to assist in examining that view.
@NWL
Patrick Kavanagh in Tarry Flynn gave a hilarious account of his horse that he called GLUG. Even though he knew the horse to a disaster, the country way was to praise him to the skies until one had managed to get rid of him.
Now if the NTMA or minister was intending disposal in the near or even distant future, the way to raise the asking price is hardly by reducing by over 50%.
Either way my point stands. Could I pose the question another way.
What value does the Minister attribute to AIB in which he holds a 98%stake. Is it €14 billion or is it €6 billion.
There is only an €8 billion difference of opinion in those advising him. Those highly paid people advising him and those highly paid advisers (Goodbody’s), advising the advisers that advise him.
But ‘Shure’ maybe was is €8billion when it comes banks or highly paid advisers or public interest directors.
PS. I note that there is no detail on remuneration levels of staff provided in the NTMA report.
PSS: Note also that average annual return since 2001 on discretionary investments is 3.1%. A performance that has made some well of people into millionaires and that’s is not counting their pension millions. The generosity of a bankrupt State know no bounds.
Now a leaving cert student would have got at least that much by putting the money on deposit with a few different banks.
PSSS: The investment portfolio is worth looking at. It looks like the NTMA like to invest in pretty much every country and company in the world, except Ireland (with a few small exceptions). Great to know that we are doing our bit for world industry.
Personally I would dump the lot of them and invest in capital projects at home, particularly broadband. We don’t have an obligation to support companies around the world, do we?
@NWL
Sorry I mixed up my P’s and my S’s in my ‘postscripts’. Perhaps I thought that as a humble citizen I was being PSSSSD on !!
This is maybe slightly OT but:
Until now, what has stopped Irish Pension Funds purchasing bonds from the NTMA?
I have read reasons such as the Sovereign bonds are not long enough maturity-wise and that the recent high yields make them perhaps unacceptably risky (although not an excuse during the boom years).
Is that it or was there something more legalistic preventing Irish Pension Funds’ participation?
Of the €20.7 billion of NPRF bailout investment in Aib and BoI, €3.8 is a ‘capital contribution’, neither shares nor loan, which is non-repayable. This is part of the bigger €6.054 billion, the balance being paid directly to Aib from the Exchequer. The shares element in Bank of Ireland at €2.85 billion is somewhat incorrect. Circa €1 billion of this money was refunded back to the NPRF on sale of shares to US consortium, so that the real cost of shares is circa €1.85 billion. (The money was then used by the government to allocate the convertible loan of €1 billion to Aib – at 10% per annum.) Also, the Preference Shares at €5.36 billion are redeemable at par, so the par value seems fairer – making a difference of €1.6 billion. The Balance Sheet value of the BoI ordinary shares (15.2%) at 31 December 2011 was around €1.25 billion, not the €370 million per accounts valuation – a difference of around €900 million.
The Balance Sheet value of Aib shares at 31 December 2011 was actually greater than the investment amount of €8.7 billion by NPRF.
If the non-repayable ‘capital contribution’ (all €6.054 billion) is eventually offset against sundry banking crisis income to the government (bank guarantee + central bank interest), then the ratio is 15.9/19.7 or 75%.
This is very different from the valuation ratio of 7.9/20.7, i.e. 40% of cost, inferred in the NTMA report