There was quite a deluge of information from NAMA last Thursday which included the list of properties to which NAMA has appointed receivers and of course the annual report. NAMA also slipped out the quarterly report and accounts for the quarter ending 31st March, 2011. Funnily enough there was no press release this time announcing the report and accounts and summarising the results. Being innately suspicious of organisations that time the release of information, particularly discretionary information, so that it all comes out at once, there will be deeper analysis on here in respect of the first quarter’s results than usual. This entry is the first of two, and carries a summary of the results. The next entry will examine some of the detail and carry consolidated financial statements which are more explanatory than those produced by NAMA.
1. NAMA made a profit of €91m in the quarter (this is the second out of five quarters to show a profit). The profit arose from interest received from developers of €276m being substantially more than the interest payable by NAMA on its bonds of €86m. NAMA made a loss on derivatives of some €35m and a foreign exchange loss of €44m. There were €26m of admin expenses of which a payment to Capita/the banks (see below) accounted for €18m.
2. Interest income on developer loans was down in the quarter (€276,235,000 in Q1, 2011 versus €330,317,000 in Q4,2010). This has been queried with NAMA.
3. There was no impairment provision recorded in the quarter. This compares with an impairment provision of €1.485bn recorded for the full year 2010. Like most asset management companies, NAMA will not recalculate the value of its loans and provision for losses each quarter. However it should be noted that NAMA’s main market,Ireland, saw declines in both residential and commercial property prices in Q1, 2011 and these declines accelerated in Q2, 2011. Increases in commercial and residential prices in theUK where NAMA has some assets increased very marginally in the first six months of 2011. So although NAMA has escaped an impairment provision in Q1, 2011, at this point it looks as if there will be a substantial provision to be made at 2011 year end.
4. NAMA generated €530m from borrowers during the quarter, representing interest, repayment of principal and disposal of assets. Interest is reported in the profit and loss account at €276m. NAMA says it didn’t sell any property itself during the quarter. So any sales will have been made by the developers. So it would seem that €254m was generated from the repayment of principal and disposal of assets by developers or sale of loans by NAMA. NAMA claims to have €17bn of performing loans (by reference to original book value) so €254m for one quarter (or €1bn annualised) is not a tremendous pay-down of debt.
5. At the end of March 2011, 23% of the value of NAMA’s loans – by reference to the original book value of the loans – was performing, that is, repaying interest (cf 40% in the draft business plan, 33% in April 2010, 25% in June 2010 and 23% in December 2010). Although that’s pretty dismal, it does mean that NAMA should be able to hold its head above water for a little time to come because if it receives interest at an average of 3.5% of 23% of €73bn, that will be just about enough to offset the interest payable of 1.5% of 42% of €73bn (NAMA applied an average haircut of 58%). In other words, NAMA will receive €587m and pay out €460m. The problems will crop up when the performing loans are repaid.
6. About 86% of the non-performing loans are 120+ days delinquent or being foreclosed. NAMA would appear to be in a weak position when negotiating with developers given that there are such serious problems with so many loans. NAMA can’t afford to appoint receivers to all of them.
7. NAMA’s big administrative expense is the payment to Capita and the four banks (there used to be five before Anglo merged with INBS to form IBRC) for the ongoing day to day management of the loans. NAMA paid €18m during the quarter and is on track to spend €72m in total with Capita and the banks in 2011, just for basic management of the loans.
8. NAMA continues to have extensive activity in derivatives, partly evidenced by the fact that the agency paid €181,000 to an external company, presumably Societe Generale, to value its derivatives in the quarter. In terms of the net loss on derivatives during the quarter, it appears to be about €35m.
9. NAMA advanced €91m of new loans to developers during the quarter which means a cumulative total of some €330m was advanced to the end of March 2011 (NAMA had approved €750-900m so quite a lot of the approved loans are still to be drawn down)
10. NAMA now has 145 staff and is expecting to recruit an additional 55 to bring the complement to 200. Remember when NAMA was supposed to have 60 staff? Of course NAMA also remotely controls some 500 staff in the banks who manage NAMA loans day to day. And there are signs that NAMA is delegating a significant amount of the asset management burden to receivers.
Part two should appear tomorrow depending on responses by NAMA to queries.
@nwl, your 2010 final observations contained this line “The bottom line is that NAMA booked a profit of €30m on derivatives in the period and present expectation is to book a relatively modest gain in the future.”
how would that square with Q1 2011…
“NAMA made a loss on derivatives of some €35m and a foreign exchange loss of €44m”
excuse me but…
44M on foreign exchange! in 3 months WTF?, I bet the guys ‘n gals in the NTMA are sleepin easy as the NPRF funds have been passed onto the banks that produced this mess.
I’m not sleeping easier, quite the opposite.
When digging a hole and reaching ‘rock bottom’, ‘Enduring’ does not consist of getting out the drilling rig and commencing drilling.