Significantly this time, reporters from the paper of record, the Irish Times and State-broadcaster, RTE were allowed sit in on the court proceedings at the High Court this morning where certain directions were sought and granted in respect of Anglo Irish Banks and Irish Nationwide Building Society (INBS). RTE is reporting on proceedings. This contrasts with the controversial exclusion of Irish Times journalists at a hearing before Christmas when certain orders were requested in respect of AIB.
Last week, a restructuring plan for both zombie institutions was sent to the European Commission and although a formal decision has not been issued by the Commission, it was reported that Competition Commissioner, Joaquin Almunia was pleased with the plan (fifth time’s a charm following the previous Anglo restructuring plan submissions).
The main outcome from this morning’s proceedings was the direction to the NTMA to auction off (“invite tenders” according to the NTMA press release) the deposit books of Anglo and INBS which were reported two weeks ago to contain €18bn of deposits (“less than “ €14bn at Anglo and €4bn at INBS). There is a further press briefing here from the Department of Finance. The Wall Street Journal is incorrectly reporting that NAMA will undertake the auction – the paper seems to be confusing NAMA (National Asset Management Agency which manages €90bn of property related loans) with the NTMA (National Treasury Management Agency which manages the national debt, the pension reserve and has overall responsibility for NAMA as well as some ancillary functions).
Lastly it is stressed by both the Department of Finance and the NTMA that this direction does not affect the security of depositors who can withdraw their funds at any time including during the auction process.
UPDATE: 9th February, 2011. The Central Bank of Ireland has issued a brief statement on the deposit moves which is noteworthy for describing the forthcoming move as a “transfer” rather than “sale”. INBS and Anglo have both issued statements but they don’t add anything to what is reported above.
UPDATE: 15th February, 2011. The Direction Orders are now available for Anglo and INBS. Sadly the Restructuring Plan referred to is not available. There is little in the Orders that has not been reported in the press though there seems to be confirmation that both organisations will be around until 31st December, 2012 at least (because that’s a date referred to for the disposal of loans)
UPDATE: 22nd February, 2011. The Independent reports that the auction has been deferred to later this week. The newspaper brings us other, previously undisclosed, details of the auction. The bidders are said to include Irish Life and Permanent, Bank of Ireland, AIB and EBS (apparently backed by Cardinal which is bidding for EBS at present). The auction is not simple as bidders must apparently make quantitative bids on the % of the deposit book to be paid as a premium, the % of deposits it is bidding on as apparently it doesn’t have to be 100% and qualitatively on the type of asset it will accept. There is no update on the Fir Tree action which could delay the auction.
[…] Continued here: NTMA takes lead in selling Anglo and INBS deposit books « NAMA … […]
The Anglo interim trading update says
The loss for the year includes €11.5bn of losses incurred on disposal of assets to NAMA which includes a negative fair value adjustment of €2.2bn on NAMA bonds received.
Any idea what this means? Why do the NAMA bonds need a fair value adjustment?
Hi Frank, there will be an entry on here later today on the Anglo trading update and this matter will be addressed. From recollection Anglo made an adjustment in the H1, 2010 acconts of 10% of the value of NAMA bonds received which could represent the EU discount (1.5%), provision for the subordinated debt not being honoured if NAMA makes a loss (5%) and the threat of additional clawback in the NAMA legislation. This may not be the answer to yesterday’s adjustment.
https://namawinelake.wordpress.com/2010/09/10/are-nama-bonds-becoming-toxic-why-is-anglo-discounting-their-value-by-9/
Anglo deposits are now 11 billion EUR and falling according to the Indo. http://www.independent.ie/business/irish/what-the-sale-of-anglos-deposit-book-will-mean-for-you-2531384.html
Interesting. Simon Carswell is reporting “Unlike in AIB’s case, the Minister did not seek to have the application heard in camera – as he can do under this draconian law – but sought to withhold certain commercially sensitive information, namely the size of the deposits to be sold and the terms of the auction process under which they will be sold.”
http://www.irishtimes.com/newspaper/opinion/2011/0209/1224289345005.html
As I understand it the deposit book size is confidential and is presumably a movable feast as depositors may withdraw their money at any time. So €11bn today might be €10bn at the end of Feb.
But it seems that the combined total (Anglo + INBS) was worth in the order of €14-16bn at face value as of yesterday.The DoF statement says “the bulk” of the deposits will be auctioned implying that some may remain.
Of course deposits are liabilities for banks, in the sense that they are debts owing by banks to people who choose to place their money in banks. It is unclear exactly what is being auctioned – plainly the banks don’t have cash, Anglo’s deposits are still represented to a large degree by non-NAMA loans. There is talk of transferring NAMA bonds to the buyers and also of the buyers taking employment responsibility for maybe 100+ current Anglo/INBS employees involved in deposits.
It is unclear what specific institutions may bid for the deposits and the list of credit institutions and institutions that may accept deposits in the State is very lengthy indeed.
http://registers.financialregulator.ie/DownloadsPage.aspx
And lastly it is unclear if this auction process still requires EC approval as presumably it is part of the restructuring plan submitted to the EC on 31st January, 2011 and which has not yet been judged.
How much will the auction raise? €150 million (1%)?
Banco Santander paid GBP £150m for Bradford and Bingley’s GBP £21bn deposit book and branch network in September 2008. And Santander received GBP £21bn of assets with their takeover of the deposit books which included €14bn from the British government. http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3100146/Santander-buys-Bradford-and-Bingleys-branches.html
In the Anglo/INBS case NAMA bonds are likely to be offered with the deposit books and there is the suggestion the bidding bank will have to take on staff from Anglo/INBS. NAMA bonds are certainly not as safe as the cash provided in the UK B&B/Santander transfer. On the other hand if some banks are required to reduce their loan:deposit ratio % then these deposits might have some value and I have heard suggestions in the low €10s of million.
And by the time this auction is organised how much will the deposits be worth at face value? It seems Anglo’s were €11.1bn at 31/12/2010 but close to €10bn yesterday. What will they be worth at face value in a month? UPDATE: There is a suggestion in the Independent today that it may only take two weeks to conduct the auction as Lauran Noon reports “the Department of Finance said it hoped to return to court for a Transfer Order, effecting the deposit handover, “within a period of approximately two weeks”. ” (http://www.independent.ie/business/irish/state-seeks-bidders-for-euro14bn-anglonationwide-loan-book-2531486.html)
Thanks, NWL. Interesting. Could be €1 then if the rout continues.
Hi namawinelake,
You said “So €11bn today might be €10bn at the end of Feb”.
It is now 10 billion EUR in deposit and assets in Anglo according to the Guardian :) :)
http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2011/feb/09/foreign-banks-bidding-anglo-irish-spoils
Thanks Ciaran, Lisa might correct me but I think she is using the €10bn reported by Simon Carswell this morning, and interestingly the quantum of deposits was supposed to be commercially sensitive and will be redacted in the order when it is eventually published by the High Court. Interestingly it seems that there may be more than deposits on offer, branches and some loans might also form part of the disposals.
I was looking at the B&B sale of deposits to Santander earlier today and was suprised to see that the EC approved the B&B restructuring plan in 24 hours (see link below). So it is feasible to conclude the deposit transfer in days and indeed the auction process seems to be well advanced.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4863698.ece