Yesterday in a preview of the Anglo report, five NAMA-related issues were outlined. Here’s what we found out from the report itself today.
1. NAMA-bound loans. Although it is quite convoluted to work out, the following would appear to be the present position for NAMA-bound loans though before the reclassification of the €1.2bn of loans to which Anglo claim NAMA has agreed (Page 10 of the report).
Anglo is accounting for a 34.3% provision for losses on tranches 3 onwards which compared to the experience of the first two tranches which saw an average discount of 58% looks like fantasy. Anglo state clearly in several places that “iIt should be noted that impairment provisions under IFRS are not a predictor of NAMA valuation discounts on transfers”. Effectively Anglo are hiding behind IFRS 9 and avoiding the recognition now of likely losses on the remainder of the NAMA tranches.
There is some interesting detail on the tranches transferred upto June 30th (all of tranche 1 and a fraction of tranche 2) on page 11 which shows, for example, that 6% of the loans transferred to NAMA received nil consideration.
2. Non-NAMA-bound loans. For the first time there is a considerable amount of detail on the non-NAMA loans contained in note 35 on page 66 of the report. It should be noted that the majority of loans transferred by Anglo in tranches 1 and 2 were associated property loans (ie non land and development). Given the 58% average haircut I would suggest that the Anglo provision on commercial property of 14% is utterly inadequate. I am sure others will work through the detail of the loans shown and the provisions but it seems to me that if the provisions on commercial property were to be increased to 40%, then along with the increased losses on NAMA loans that will need to be recognised in the next half year, Anglo will need a cumulative net bailout in excess of €30bn.
3.Reclassification of NAMA loans: Whilst Anglo CEO Mike Aynsley was talking about €2-4bn of NAMA-bound loans being reclassified two weeks ago, it would appear from the Anglo press release today that the figure is €1.2bn (footnote one on page one of the release). No further detail appears.
4. Redemption of NAMA-bound loans. There would appear to have been nil redemptions which is partly re-assuring as it means that Anglo has not been selling loans for less than par. The mystery of Bank of Ireland’s €4bn redemption between late 2009 and early 2010 remains and should be dealt with by NAMA’s audit of the banks later this year to ensure all eligible assets have been transferred.
5. Paddy McKillen’s loans : Incredibly Anglo’s dispute with NAMA about the eligibility of Paddy’s loans doesn’t get a mention at all. Incredible because Paddy’s loans should be financially significant to Anglo given that they’re supposed to be performing and of good quality.They could have made nearly 10% of the Newbank loan portfolio. Strange indeed that there is no mention of the dispute. Remember you can find the background and all the latest news on the Paddy McKillen judicial review proceedings under the Paddy McKillen v NAMA tab.
NAMA Wine Lake 