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Archive for January 31st, 2012

Someone should enlighten NAMA about so-called SMART objectives, with SMART standing for Specific, Measurable, Achievable, Realistic and Time-specified. Then we might get something less wishy-washy than the objectives for the Agency published this afternoon – available here. This summarises the main points

“Ensuring the implementation of schedules for asset sales that have been agreed with debtors.

Optimising cashflow to NAMA from loans and debtors with a view to paying down 25% of the Agency’s debts (€7.5 bn) by end 2013.

Adopting an active strategy and establishing a panel for selling loans.

Establishing mechanisms to attract international investor capital, such as Qualifying Investor Funds (QIFs).

Development of the Deferred Mortgage initiative for residential properties.

Rollout of vendor finance on the commercial property portfolio.”

It is heavily process-focussed which is typical of the Irish civil service, rather than objective-focussed. Okay the Agency says that it will “optimise” – in other words, “try its best to achieve” – cashflow so as to pay down 25% of Agency debt by the end of 2013. This is a self-imposed target and although the document makes reference to quarterly oversight by the bailout troika and even though NAMA chairman, Frank Daly has previously talked about the target being “copper-fastened” into agreements with the Troika, NAMA has not been able to point to specific wording in any agreement to support that claim. So to restate that objective – “NAMA will do its best working with loans and debtors in order to achieve a self-imposed and flexible target next year” As for 2012’s contribution to that target, who knows.

The “development of the deferred mortgage initiative” has been in the pipeline for at least eight months and the current position is the “initiative” is expected in the next month, NAMA has appointed a project team, but reading today’s report, the matter may lie in the hands of the European Commission to approve in competition terms.

“Rollout of vendor finance on the commercial property portfolio”, otherwise called staple financing was actually achieved in September 2011 when NAMA offered One Warrington Place for sale with upto 70% “staple financing” available. In the event, the buyer Prudential, didn’t opt for staple financing – perhaps it felt the 2.5% markup NAMA is making on its staple financing loans is excessive. But here you have NAMA stating an objective which was achieved four months ago!

And many of the objectives are outside the Agency’s control eg getting approval from the European Commission to a mortgage initiative about which there are serious competition concerns.

So no profit target, no cashflow target for 2012, no numbers for approval of business plans and a bunch of woolly unspecific, process-focussed, time-unknown objectives – “we’ll try our best”.

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Yes these are four months out of date, but today’s publication of the NAMA management accounts for the three months ending 30th September 2011 have actually been published in record time. NAMA handed over the accounts on 9th December, 2011 well before the deadline of 31st December 2011 specified in the NAMA Act, and the accounts have today been approved by the Department of Finance, though why there should be any delay, let alone a seven week delay – is still not clear to me.

The report is here. The accounts are here.There will be summary analysis here later with a detailed review tomorrow.  This is what NAMA wants you to know about the accounts [with comments added at this end]- not meaning to dwell on the negative but as has been frequently commented upon here, NAMA is running out of performing loans as it sells the “low-lying fruit” – see the last point (5) below:

“for the quarter ending 30th September 2011 the main points are:

(1) NAMA generated over €1.4 billion net cash from operating activities during the quarter, driven by cash receipts from debtors of €1.8 billion. [this €1.8bn comprises loan repayments and interest, and disposal of loans/properties – it is suspected that €800m of these receipts will relate to the sale of the Maybourne loans which was announced as a done transaction on 29th September 2011. NAMA is still obstructing any meaningful analysis of the cash receipts between interest, loan repayment and disposal]

(2) Cash outflows included €500 million in net debt repayment (bringing the total amount of debts repaid by NAMA since inception to €1.6 billion). Other outflows included €199 million in interest [€199m], expenses [€41m] and other funding costs and €71 million advanced to debtors to enable them to complete projects and to fund working capital [total of new cash advances to debtors is €477m and some €900m has been approved].

(3) Profit during the third quarter was €317 million. Cumulative profit for the first nine months of 2011 was €526 million. [This is profit before impairment charges. NAMA’s latest forecast is that it makes  a €600m profit before impairment for 2011 and that would indeed seem feasible as it needs only book €74m of profit in Q4,2011 to achieve that. What will the impairment charge be for 2011? I would estimate €600m+, leading to an overall loss again for 2011]

(4) NAMA had total cash balances of €1.9 billion at the end of September. [This had grown to €3.8bn by the end of December 2011]

(5) The percentage of performing loans in the portfolio at the end of September was 21%, down from 23% in the previous quarter. This was largely due to the disposal of a number of income-generating assets.

NAMA also had a very strong final quarter in 2011 and ended the year with €3.8 billion of liquidity.”

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(The new properties added in December 2011, click to enlarge)

NAMA has today published its now regular monthly list of properties subjected to foreclosure action – the list shows NAMA foreclosed properties at the end of December 2011. The full list is here, the list of new properties added is here, and you will find previous editions of the monthly list which was first launched in July 2011, here.

You should read the full list of NAMA’s terms for accessing the lists here. But in summary, this is what you’re looking at:

(1) Real estate property subject to loans in NAMA to which receivers have been appointed. The receiver’s website is shown against each property.

(2) This is all the real estate foreclosed sorted by country, and then region.

(3) Not all of the property may be for sale.

(4) Contact the receiver with enquiries or expressions of interest in the first instance. Only pester NAMA if you’re not getting any response from the receiver and make allowances that receivers will be busy with queries, particularly after a new release of foreclosed property.

(5) If you think there are mistakes on the list, contact NAMA.

UPDATE: 31st January, 2012. So what’s new? 35 new foreclosed properties, none of which is available for sale, which might beg questions as to whether NAMA is falling behind in its work. The foreclosures reflect the companies to which receivers were appointed in December 2011 and include Cleary Doyle and Banna. NAMA’s description of the properties becomes more vague with each release it seems. How does “Listowel – Development- Not Commenced”  help you to identify the property?

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“As you know Vincent, there are good things starting to happen in this economy, exports are up.. money is actually flowing back into the Irish banks and this time last year money was flowing out of Irish banks like a burst water mains”
Deputy Liam Twomey, Fine Gael TD and vice-chairman of the the Oireachtas Committee on Finance, Public Sector and Reform, speaking on Tonight with Vincent Browne (from 31:00) on 19th January, 2012

“[Karl, is this true?] ..I hate to bring bad news, but the latest figures show the Irish economy contracted by 2% in the third quarter of last year, which I think is far from a healthy stabilisation. Look it’s not surprising, the whole of the European economy is suffering now through the euro crisis. But what do we know about the fourth quarter? We know that taxes fell further behind, the unemployment rate is sort of edging upwards. In the first half of last year, it may have started to stabilise and grow but it does look as if we are in recession again. In relation to deposits, we have stopped the large outflow of deposits that was happening around the time that the EU/IMF deal was concluded and after it, but there’s no big rush of money into this country”
Professor Karl Whelan, economics lecturer at UCD and former central bank employee speaking on the same programme

“customer deposits in the Irish Covered Banks have been stable since the middle of the year and in more recent months have shown modest growth in aggregate terms”. December 2011 information note from the Department of Finance

This morning, the Central Bank of Ireland (CBI) has released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 31st December 2011 and shows that during the month of December 2011, deposits by ordinary households and businesses actually increased at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. The increase of €1,036m from €101.4bn in November 2011 to €102.5bn in December 2011 was the biggest monthly increase since April 2011, when confidence was high after the publication of the March 2011 bank stress tests. The monthly increase means we are now back at deposit levels seen in July 2011, and that is in general terms, positive news. On this blog the key focus each month is on the movement in private sector deposits at the covered banks, as this is seen as a signal of banks returning to sustainable financing. Private sector deposits fell at covered banks in the past 12 months by €11bn from €114bn to €103bn, but most of that fall took place in the first six months of 2011 and the final six months has looked stable despite the ongoing crisis in the EuroZone. I think it is fair to say there are signs of stabilisation, but it would be a gross exaggeration to claim “deposits were flowing” into Irish banks.

The CBI doesn’t provide an analysis of deposits at the covered banks – about the only analysis it doesn’t provide – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits rose by €0.6bn in December after a fall of €1.2bn in November. Household deposits at all banks are now back at July 2011 levels. Total deposits from all sources in all Irish banks fell €5.9bn in December, mostly as a result of a decline in €5.7bn in deposits held by MFIs (see below for an explanation of MFIs)

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks based in the IFSC which do not service the domestic economy.

Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.

And lastly the six State-guaranteed or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank of Ireland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outside Europe)

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