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NTMA issues results and business review for 2011

January 13, 2012 by namawinelake

For those of you wondering what the CEO of the National Treasury Management Agency (NTMA), John C. Corrigan does for his salary of €490,000 plus 80% bonus, you might find some assistance in the NTMA’s “Results and Business Review for 2011” published this morning. In fairness to John, for 2012 he has agreed a 15% cut to his annual salary for this year only, which brings him down to €416,500, and he has reportedly waived any bonus that might have been due for 2011. So what did John do in 2011 to justify his €9,400 per week basic?

PlainlyIrelandwas out of the traditional debt markets in 2011, though there is still limited activity in short term debt. We are in an IMF/EU programme which funds the country in return for compliance with a Memorandum of Understanding agreed amongst us all. So the main function of the NTMA, managing the national debt has diminished considerably in complexity.

This morning’s report provides the following nuggets on the NTMA’s activity last year

– achieved a 1.6% return on the so-called “discretionary” – meaning the NTMA has discretion in how it invests – national pension reserve fund. Before you all roll around on the floor laughing, the NTMA claims that the average return inIreland’s private pension industry in 2011 was minus 3.5%

–  made presentations to over 300 investors around the world

– it provided advice on burning subordinated bondholders which has resulted in a total of €15.5bn savings in state guaranteed banks, of which €5.6bn arose since 31st March 2011

– the NTMA has hedged against currency and exchange rate risks. “Hedging” means buying insurance so that when we come to repaying the IMF which will be in a mix of currencies including the US dollar, we don’t encounter any nasty shocks. Ditto for interest rates, “hedging” means buying an insurance so that if interest rates adversely change, you don’t get burned.

– there’s no mention of the €3.7bn boo-boo in the calculation of the national debt, which seems to be mostly the Department of Finance’s fault anyway, though it is unclear to me why the matter wasn’t raised up the line at the NTMA when the DoF continued to incorrectly calculate the debt

– the NTMA claims that the fall in the 10-year bond rate from a high of 14% to “currently stand at 7.5%” – not sure where the 7.5% comes from, rates are presently 7.84% mid-point and looking at the past six months I can’t see any day on which rates went as low as 7.5% – is in part due to “increased investor confidence”

– in August 2011, banking systems functions in the NTMA were transferred to the Department of Finance

– the NTMA announced in November that it would invest €250m in infrastructure but that apparently depends on other investors ponying up €1bn, and progress with getting that funding seems slow and uncertain

– from September 2011, the NTMA has an additional function – NewERA – which is manage the Government’s stake in semi state companies

– the NTMA has overseen some Government capital expenditure in schools through the National Development Finance Agency

– and finally there’s an update on NAMA which also falls under the NTMA umbrella “NAMA has approved sales of assets totalling €6.6 billion. A large proportion of the sales proceeds will be used to pay down NAMA’s borrowings and the Agency has used its strong cash flow to redeem €1.25 billion of bonds in issue and repay €299 million in advances made by the Minister for Finance. At the end of 2011 NAMA had total cash and liquid asset balances of €3.8 billion and is on track to meet its target of repaying 25 per cent of its outstanding debts by the end of 2013.”

UPDATE: 26th January, 2012. The NTMA has at last released its investor roadshow presentation “Ireland on Recovery Path 2012“. It’s well worth a read, it summarises the economic position of the country and our projections. It has a small section on NAMA which really just summarises all that we know. The NTMA thinks commercial property is at the bottom, that commercial rents have overshot on the way down and that residential property still has some way to fall, but no quantification is provided.

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Posted in Banks, IMF, Irish economy, NAMA, Politics | 7 Comments

7 Responses

  1. on January 13, 2012 at 3:19 pm John Gallaher

    So he is only half as good as Somers,where can we find the skinny on Somers pension bet its giantic.
    Corrigan is guaranteed half a million a year,completly confused on what he is doing exactly.

    “Mr Corrigan’s predecessor at the NTMA, Michael Somers, who retired in 2009, was paid more than €1 million in 2008. Dr Somers was paid a salary of €576,000 as well as a performance-related bonus of €403,000 and a fee of €30,000 for his role as a commissioner of the National Pension Reserve Fund.”
    http://www.irishtimes.com/newspaper/ireland/2012/0103/1224309736354.html


  2. on January 13, 2012 at 4:35 pm Niall

    @ NWL We dont have a ten year bond, but the rates on the two 2020 bonds i.e. eight year bonds was quoted on Thursday at 7.72% & 7.62%. The rate on the longer bond due in 2025 was 7.57%.

    These rates are taken from http://www.ise.ie


    • on January 13, 2012 at 4:47 pm namawinelake

      @Niall, indeed we no longer have a 10 year bond, but we have 9 year bonds expiring in 2020 which are generally taken to be our benchmark. It is presently trading at just over 7.84% having been close to 7.9% earlier but I cannot see it trading at 7.5% in recent times.

      https://namawinelake.wordpress.com/about/pigs-10-year-bond-yields-bloomberg/


  3. on January 13, 2012 at 8:05 pm john gallaher

    “Mr Corrigan told an Oireachtas finance committee last September that the NTMA paid private-sector rates to its executives to get skilled staff to do “market-demanding” work.”

    Half a million a year to go to a few meetings,why would the head on NTMA fly all the way to New York to attend a Irish Equity forecast arranged by Davy last week.
    Extremely odd that he feels the need or desire to meet and greet non investors,does the NTMA have no better use for Corrigan.
    Always on and on about ‘market’ more commercial than other state bodies,agreed,fire him.The ‘company’ is BK no use for a 500,000 a year CFO.


    • on January 13, 2012 at 8:16 pm namawinelake

      @John, it gets better. The NTMA have a presentation on Ireland which was used in the last couple of weeks called “Ireland on Long Path to Recovery”. The NTMA has so far declined to make the presentation public. Which is really poor, especially when some observers make reference to it in important statements.


  4. on January 13, 2012 at 11:47 pm who_shot_the_tiger

    “NAMA has approved sales of assets totalling €6.6 billion. A large proportion of the sales proceeds will be used to pay down NAMA’s borrowings and the Agency has used its strong cash flow to redeem €1.25 billion of bonds in issue and repay €299 million in advances made by the Minister for Finance. At the end of 2011 NAMA had total cash and liquid asset balances of €3.8 billion and is on track to meet its target of repaying 25 per cent of its outstanding debts by the end of 2013.”

    ….. And so the spin continues. Because NAMA is not on track to make a profit. I’m beginning to feel like a broken record, but to repeat – it is on the way to making a substantial loss.

    A strategy of selling UK and overseas properties in a disproportionate manner is dominating NAMA’s policy. This concentration has undoubtedly been at a cost to the domestic market, which has continued to slide sharply since the process began and needs far more intensive action from NAMA. Ireland is by far NAMA’s largest exposure in terms of loan assets and is an area where more imaginative and decisive actions would benefit the overall economy.

    NAMA boasts of recording a profit on a small proportion of its loan book, but there is little or no recognition of the very substantial losses accruing on the vast bulk of the overall loan book. Those losses are rolling up since November 2009, without being recorded (except on this blog). This is similar to the banks’ errors when they failed to recognise, record or address very severe impairment issues in their loan books. If this continues, NAMA will face massive shortfalls in the medium term.

    I accept that the lack of liquidity in the Irish market has had a negative impact on NAMA’s ability to dispose of assets in Ireland and that while the Irish Banks have the money, they are not lending.

    So NAMA may say that it had no alternative but to focus on the liquid markets such as the commercial property market in the UK. Great – if the objective is solely to generate a profit on paper in the current year. But, it is detrimental in the medium to long term, if NAMA has to manage the loan book out over a reasonable period of time, with minimum loss to the Taxpayer.

    By selling almost exclusively the quality investment assets, which are the loans most likely to be performing, and leaving the non-performing loans that are tied to land and development sites, NAMA will have a serious imbalance in terms of the mix of assets that it will end up holding. And it also de-stabilises the overall holdings of individual borrowers – some of whom are needed to survive in order to rebuild the construction and property sector.

    One of the biggest issues facing NAMA is “Who will buy Irish assets when we come to wind down the book?” Practically all indigenous developers are broke.

    I was asked on another string to provide a solution to the above. I could write a book on that, but in a nutshell, NAMA should start to address the Irish market in a serious way – commencing now. It should also use whatever political muscle it has to ensure that the banks lend on residential and commercial property assets in a measured, but meaningful, way over the next two years.

    Those local developers that have any sort of portfolio left are trying to find funds abroad to restructure or sell it. NAMA needs to be supportive of selling these portfolios as entities; and not just disposing of the quality assets within them on a piecemeal basis, leaving the dross behind.

    Apart from the purchasers who want to buy the limited number of trophy Irish assets, there is investor interest in putting several billion euro equity into properly structured Irish property groups and portfolios of loans that have a good mix of exposures.

    To date, potential international investors have been totally frustrated by the pace of the NAMA process and its attitude to what the incoming funds believe should be seen as positive advances of interest on their part.

    There is no guarantee that these investors and their capital will remain in place indefinitely, waiting for NAMA to become investor-ready.

    As one fund put it to me recently, “We’re on page 70, you’re on page 68, but NAMA’s still on page 30.”

    NAMA has a further problem in that the non-NAMA banks are making large provisions for write-downs in their Irish loan books and are likely to move to a more aggressive disposal phase in the very short term. They will have first mover advantage and will capture the first tranche of capital available for the Irish property market as they become increasingly active in the market. In doing so, they will absorb most of the limited capital that is available for Ireland.

    In essence, asset stripping the Irish portfolios of their prime properties makes it difficult for borrowers within NAMA to attract investor capital, and this will be the “kiss of death” for essential outside investment into the Irish property market.

    NAMA needs to radically change their policy from the sale of individual “headline grabbing” trophy sales to selling select portfolios with a mix of assets.

    In the vernacular, “Stop pandering to the media for short-term gain, which will only precede long-term loss – and get commercially serious. P.S. It’s no wonder your executives are leaving”


  5. on January 26, 2012 at 6:49 pm Gombeenland

    Thanks for the good analysis, on the provision of funds it is highly unlikely that anything much of foreign funds will be available in the short to medium term at either NAMA expectations or frankly at the levels of the so called Irish “property developers” , i.e. the ones that are still standing. This is simply because no one outside of Ireland believes a word that they are told when they visit Dublin. There is a major trust and confidence issue, as well as the more obvious price issue. The inability of NAMA to begin to put their best foot forward and sell some stuff, good, bad or indifferent at this stage only adds to the air of disbelief abroad.



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