Anglo half year results – NAMA tranche 3-onwards provisions shown at 34.3% compared to an average of 58% in tranches 1 and 2.

Having perused the Anglo first half year report, you could be forgiven for concluding that now that Mike Aynsley has taken over, Anglo has cast off its old practices and is now a paragon of good management with a clear and accurate assessment of its finances and prospects. This is the same Mike Aynsley who became CEO in September 2009 and oversaw the submission in November 2009 of a restructuring plan to the European Commission. In returning the plan to Anglo in March 2010 requiring a re-submission in May 2010, the Commission described Mike Aynsley’s plan as lacking detail and prompting doubt in its credibility and wrote off as overly optimistic the claim that Anglo Newbank could be generating €1.2bn per annum in profits by 2014!

Having quickly reviewed the half year report (press release is here and the report itself is here), there would appear to be a lack of detail and credibility in some statements including financial statements. There will be a detailed report here later today on the significance to NAMA of the Anglo half year report but for the time being it appears that Anglo is maintaining a 34.3% provision for losses on the €19.582bn of NAMA-bound loans after tranche 2 (note the €19.582bn may decrease by €1.2bn as a result of reclassification but that doesn’t detract from the provision %).

It would appear that if Anglo were to maintain a 58% provision on tranches 3 onwards (see earlier entry today for the derivation of 58%) then that would require an additional loss at this point of €4.6bn. Anglo appear to be hiding behind the International Financial Reporting Standards (IFRS) for valuing loans though I can’t see anywhere (including management commentaries) where they project losses using their best estimates. The implication is that the bail-out costs will be several billion in excess of €25bn.

Here are the NAMA numbers (there is an assumption that the new “collective provision” for all losses on both NAMA and non-NAMA loans is allocated on a pro-rata basis by reference to the face values of the NAMA and non-NAMA loans)

There will be a more considered and detailed update here later today.

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