Ugly row breaks out between NAMA and Anglo

A row of handbag-wielding proportions has broken out between Anglo and NAMA as the Anglo CEO, Mike Aynsley has given an interview to the Australian Financial Review (subscription required) which is briefly critical of the execution of NAMA. The article is reported domestically by the Irish Times and the Irish Independent. NAMA has responded to the criticism by (yet again) wheeling out a cannon to deal with a fly – indeed NAMA seems to have outdone itself for the bitchiness of its response (see here and here for previous examples).

Having read the full article covering the interview with Mike Aynsley I can report that there is a single reference in it to NAMA which reads “He was particularly scathing of the previous Irish government’s handling of the the state “bad bank”, or National Asset Management Agency. While he described NAMA as “a good dea”, he claimed it had been poorly executed” So it is those five words, “it had been poorly executed” that have caused the brouhaha. NAMA’s response is not available from its website but the Irish Times carries some detail from “a NAMA spokesman” which includes describing the Anglo CEO’s comments as “misguided” and “banks like Anglo played a major role in creating the problems that Nama is now working to resolve and the criticisms of the chief executive of Anglo have to be seen in that context” and “unlike Anglo, with over 1,000 exiting staff, Nama – as a start-up organisation which had to recruit its staff from the market – has had a remarkable first year.”

So let’s examine the handbag-wielding contenders:

In the blue corner, you have Mike Aynsley, Anglo’s 53-year old Australian CEO who took up the poisonous role in September 2009 after 30 years in the banking industry. Given what has emerged at Anglo, he could never realistically have been expected to emerge from that car-crash of an institution smelling of roses. But having said that, his tenure at the helm of Anglo has not been marked by any great successes and he has had more of his share of failings

(1) In March 2010, Mike told the Irish Times “detailed financial examination by the bank and its advisers had (sic) shown it would cost between €6 billion and €9 billion – in addition to the €4 billion already invested in the bank – to restructure the lender and run the bank as a going concern”. A few weeks later, Minister Lenihan shocked us with the estimate of €23bn which then went up to €29-34bn in September 2010. So you would have to ask what grasp Mike had of the reality of Anglo’s situation in March 2010, six months after he took over the reins.

(2) According to my count we are at v5.0 of the Anglo restructuring plan. The first was submitted to the European Commission in November 2009, two months after Mike took over at Anglo. In returning the plan to Anglo in March 2010 requiring a re-submission in May 2010, the Commission described Mike’s plan as lacking detail and prompting doubt in its credibility and wrote off as overly optimistic the claim that the Anglo Newbank could be generating €1.2bn per annum in profits by 2014. There was another plan in May 2010 which was effectively rejected and another at the start of September which was eventually put down on paper in October, it was unclear if there was another one in November but we do know that a new plan did go to the Commission on 31st January, 2011. The reception towards the previous plans does not portray Mike  in a good light, to put it mildly.

(3) Anglo’s handling of the David Drumm issue seems cack-handed in the extreme. It seems that an offer to settle claims by David Drumm which included bringing his vast pension pot and his family home into the mix was rejected by Anglo and then David stuck two fingers up to them and initiated his own bankruptcy proceedings in Massachusetts. Having followed the saga closely since last October, it seems that Anglo has been wrong-footed at practically every turn and I would love to see the bills for the legal costs being run up by our 100% State-owned Anglo in pursuing a €8.5m loan which was apparently going to be repaid in full

(4) Just over a year after he joined the bank, Mike has lost what must have been his right-hand man in this crisis, Anglo’s Chief Financial Office, Maarten Van Edens.

(5) And for all of this, Mike’s is paid a salary of €500,000 and reportedly some handsome allowances and expenses on top for which he receives criticism. And to cap it all, the hapless Mike was burgled last November 2010.

In the red corner, you have the asset management heavyweight, NAMA which might reflect on the following aspects of its execution

(1) Its loss of €35m reported to date is dwarfed by the ~€2bn decline in value of its loans reflecting the fact that the agency is valuing loans acquired using a valuation date of 30th November, 2009, after which, NAMA’s primary market, Ireland, has continued to tank.

(2) Although NAMA had taken over €71bn of loans at par value by December, 2010, it seems that all but €27bn was acquired using estimated valuations. It is true that the EU has approved the valuation of the first two tranches. NAMA apparently missed the EU deadline of acquiring all of its loans by February 2011.

(3) In the Paddy McKillen case, NAMA has wasted God knows how many millions in defending an action which it eventually lost, the Supreme Court having determined that NAMA did not make a valid decision to acquire Paddy’s loans in December 2009.

(4) NAMA’s business plans (the draft and the June 2010 versions) are laughable, for their lack of detail which might give their audiences confidence in the projections

(5) Speaking of projections, NAMA believed that the discount to be applied, on average, to loans it was acquiring from the banks would be 30% in September 2009 but the present estimate is 58%. NAMA blames the banks for dud information but seemingly seeks to deny any ownership or responsibility for the original figures which in other organisations would have been validated.

(6) Some ten months after NAMA took over the first tranche of loans it seems that there is not one agreed business plan where both NAMA and the developer (and apparently the developer’s wife) have signed each of the three documents, memorandum of understanding, heads of terms and final agreement. NAMA has been spoofing about there being 12 (or 14) memoranda which have been “or are close to” being signed for the last three months.

NAMA is entitled to defend itself against criticism even if that criticism is published in one of a few financial newspapers on the other side of the world and even if the criticism is confined to five words. But again, the tone of NAMA’s defence is just ugly – “you’ve lost 1,000 employees in the last year, Nah Nah Na Na Naah”. Seriously, has NAMA got an adolescent with low self-esteem and identity issues running its PR.

Despite some failings the agency has taken on a huge volume of loans, employed 100 people directly and has started the process of managing those loans – the numbers involved are enormous and NAMA has at times struggled to cope. But instead of a robust and honest defence of its work we continue to see NAMA lower itself to the level of – let’s face it – not the most credible of critics. In Mike Aysley’s case those five words  – “it had been poorly executed” – deserved at most a brief paragraph outlining achievements and the enormity of the challenge.

And lastly, if you are a NAMA spokesman is it too much to ask that you be literate enough to know that plural nouns take plural verbs as not in “this is hardly the hallmarks of poor execution”? Or maybe that too is a criticism for which handbags are appropriate.

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