Last week a couple of details went largely unnoticed even though on the face of it, both represented multi-billion euros of good news for the nation.
(1) The first was the release of Anglo’s unaudited financial information for full year 2010. Although we could be forgiven for swooning at the headline record Irish 12-month corporate loss of €17.6bn, the four-page release went on to say that this loss included “a loss of €11.5bn on disposal of eligible assets to NAMA”. At the end of 2009, the previous year, Anglo had €35.602bn of loans destined for NAMA against which a provision of €10.12bn had already been reported as a loss. Adding the loss of €11.5bn for full year 2010 means that Anglo has made a cumulative loss of €21.52bn on some €35.602bn of loans (that is a 60.7% haircut). Now a 61% haircut is bad but it is not as bad as the 67% estimated by NAMA back in September 2010 (in the base scenario) or 70% in the adverse scenario. As indicated on here last week, there has been no new transfer of loans from the NAMA banks to NAMA since before Christmas (the total transfers in the pre-Christmas update were €71.2bn and that hadn’t changed when NAMA spoke to the press last week). And although NAMA has still to absorb €17bn of loans, €12bn relates to sub-€20m exposures at Allied Irish Banks and Bank of Ireland. The remaining €5bn relates to Paddy McKillen (€2.1bn) and other objectors. But the betting is that the €5bn represents “cherry assets” so the haircuts are unlikely to even get as high as 61%. This would therefore all seem to indicate that Anglo’s final losses on its NAMA portfolio are approximately €2bn (67%-61% * €35bn) less than previously thought. Sadly the non-NAMA loan losses are in many people’s opinion likely to be more than previously reported so the conclusion to the NAMA tale might not change much, but on the face of it, we actually got some good news last week. And I notice from the court application by Fir Tree Capital in New York against Anglo that they claimed some €35bn of Anglo loans went to NAMA at a 62% discount (I think they’re 1% out though that’s not relevant to their case)
(2) Alan Dukes, the chairman of Anglo last week claimed that the banking bailout might cost nearly €100bn (comprising €46bn earmarked by the Department of Finance in September 2010 + €35bn of the IMF/EU bailout + €15bn additional funding to restore a decent banking system in the State and none of this 15bn was for Anglo). And again, naturally we all focused on the €15bn extra which this former Minister for Finance and Anglo chairman since June 2010 and before that, for 19 months, he had been a public interest director appointed by Minister for Finance, Brian Lenihan. His claims for future bank bailout costs were attacked by Minister Lenihan and Alan Dukes’ ability to predict capital needs in banks other than Anglo was questioned. So with all that hullabaloo going on, you might have missed the statement on the underrated Vincent Browne Show, practically uttered beneath his breath, that €29bn (the base scenario for Anglo’s ultimate bailout) might be enough – indeed the final figure might be a bit less. So it would seem that the adverse scenario which might cost us €34.3bn at Anglo is no longer seen by Anglo’s chairman as likely. Again, that is good news.
In the context of a financial crisis that is costing us in the order of €50bn at least, a few billion here and there might seem like an irrelevance but when we finally come to relate these astronomical costs to the reality of life in Ireland, they will be significant (€2bn still goes a long way).
NAMA Wine Lake 