Latest central bank statistics show continuing stabilisation of private sector deposits at covered banks

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 January 2012 and shows that during the month of January 2012, 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 €104m from €102.5bn in December 2011 to €102.6bn in January 2012 was smaller than the €1bn+ increase in December, but it nonetheless marks the second month of increases and 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 €9bn from €112bn 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 fell by €0.1bn in January after a rise of €0.6bn in December. Household deposits at all banks are now back at August 2011 levels. Total deposits from all sources in all Irish banks fell €3.8bn in January, mostly as a result of a decline in €4.3bn 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 ofIreland) 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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Stop press: NAMA publishes new foreclosure list of properties

(The new properties added in January 2012, 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 January 2012. 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. It is hoped to have the list in an spreadsheet format shortly, available 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 for receivers being busy with queries, particularly after a new release of foreclosed property.

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

According to NAMA “the list includes 35 properties which were added in January. The total number of properties now listed is 1,119 (some of which are multiple properties such as apartment blocks). The properties to which receivers were appointed during January include a mix of residential, development, commercial and agricultural assets located in both Ireland and the UK.”

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How US “vulture capitalist”, the Blackstone group is insinuating itself into the fabric of Irish state-business

It seems these days that not a week goes by without the name of some new foreign outfit hitting the domestic headlines, as international investors look to Irelandfor opportunities in the wake of the property and banking collapses. And that is to be expected with the destruction of wealth at home, and the fact we have both a property and a banking overhang – in the sense that our banks are required to “deleverage” or in simple terms sell loan-books and non-core assets. This time last year an American company called BlackRock was making headlines as it had been engaged by the Central Bank of Ireland to conduct credible stress testing of Irish banks. Before then, Blackrock was just an upmarket district of Dublin.

Another American company that has been getting a foothold in Irish business is Blackstone – both are “black” or “schwarz” in German, but it is Blackstone that is headed up by Steve Schwarzman, though I see Enda Kenny is calling him “Stephen”. You might recall Steve on here for his injudicious speech he gave in December 2010 on the opportunities in Europe – “we’re basically waiting to see how beaten up people’s psyches get” and best of all, “you want to wait until there’s really blood in the streets”. Now before we take too much umbrage at foreign investors salivating over Irish assets, let’s not forget that massive wealth has been destroyed here, the economy is at best stabilising and the banks are still weak and are not in lending mood/mode and foreign capital and investment is essentially a “good thing”.

But having said that, Blackstone’s inroads into Irish in the past year are remarkable and have gone largely unnoticed. It was in America that Blackstone made its first bid for Irish state-owned assets when it went after Anglo’s USD 8bn (€6bn) loan-book which Anglo eventually sold to Lone Star, JP Morgan Chase and Wells Fargo. In October 2011, the managing director of the Blackstone group, Tom Kelly was one of the participants invited to the Global Irish Economic Forum at Dublin castle. Another attendee at that conference was Gerry Murphy, the managing director of The Blackstone Group LP. In October also, Blackstone took over a company with Dublin links – Harbourmaster Capital is an asset management company with €8bn under its wings, and two of its directors Alan Kerr and Mark Moffat are based in Dublin, and the back-office functions of the group which employ some 40 people are expected to remain in Dublin. On 8th November 2011, An Taoiseach Enda Kenny together with Minister for Finance, Michael Noonan met with the chairman of the Blackstone group, Stephen “Steve” Schwarzman in Dublin. On 12th February, 2012 it was reported by Ronald Quinlan in the Sunday Independent that IBRC (“Irish Bank Resolution Corporation”, the resultant entity from the merger last year of Anglo and Irish Nationwide Building Society) had retained Blackstone to advise on the disposal of its remaining UK and Irish loans – worth €30bn at nominal value. And let’s not forget unconfirmed reporting that the Minister for Finance had appointed Gerry Murphy – visitor to theDublin castle conference in October last – to the new NAMA advisory board.

“Blackstone”, a name you won’t have heard much about before.

Now last week, the Minister for Finance faced a batch of questioning on state involvement with Blackstone. Minister Noonan confirmed that Blackstone may indeed bid for Anglo loans in future, and the Minister dismissed concerns about conflicts of interest claiming that IBRC had engaged an advisory division of Blackstone to advise on the disposal of its UK and Irish loan books, but it would be a completely separate division of Blackstone, the investment division, that could potentially bid for IBRC’s loans. Not only that, but the Minister has it that another company you may not have heard of, FTI Consulting, has provided “independent advice” to IBRC on the matter. And to cap it all – “my [Minister Noonan’s] officials sought assurances from the bank that no conflict of interest existed in relation to the appointment and these assurances were provided by the Chairman of the bank.”Well that’s assuaged those concerns then!

Minister Noonan declined to disclose what money IBRC is paying to Blackstone for advice on itsUKand Irish loanbooks, citing confidentiality. So we won’t know how much we, and “we” own IBRC 100%, are paying Blackstone to get advice on a sale of assets whose buyer might well be….Blackstone!

And what about Gerry Murphy’s involvement with the NAMA advisory board? Minister Noonan said “I have appointed Mr Michael Geoghegan to chair a small group of advisors to advise me on the future strategic direction of NAMA. Mr Geoghegan has agreed to carry out his role on a pro bono basis. I am currently considering the names of potential candidates who have the appropriate experience and background to work effectively on the group of advisors with Mr Geoghegan. I expect to announce the other members shortly. At that stage, I will also announce the group’s terms of reference, as well as its reporting framework and arrangements in relation to costs.”

The above is unusually obtuse language from a man who is probably the most articulate in Irish, or indeed most countries’, politics. It’s obtuse because Minister Noonan doesn’t confirm that Gerry Murphy has been appointed though he says “I expect to announce the other members shortly” and “other” refers to current or future members of the NAMA advisory board whose names are not being currently considered because presumably they have already been appointed.

Presumably Blackstone will be allowed bid for NAMA assets on the same basis as IBRC’s assets. And remember this is taking place on the watch of a political party whose 2011 Election Manifesto commitment was to do something about “the same small network of professional advisers, accountants, lawyers, financial advisers or other consultants are linked NAMA, the NTMA, the bailed-out banks, the Central Bank and the Department of Finance. This presents an obvious conflict of interest which undermines confidence in Ireland’s public and private sector governance.”

This morning the Sinn Fein leader Gerry Adams asked An Taoiseach about the potential for conflict of interest in the State’s engagement with the “vulture capitalist” Blackstone – the video of the record-short five minute question and answer is here – but Enda Kenny declined to address the matter directly claiming that disposals of Anglo’s and indeed NAMA’s assets would be subjected to the highest ethical standards and suggested Minister Noonan provide a more detailed answer. An Taoiseach did say that “sections of major groups like Blackstone are legally separated”. Hmmmm.

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“its treatment of Treasury was utterly misleading, unreasonable, commercially sharp to an extraordinary degree”, Treasury Holdings and NAMA – the Treasury affidavits:

The case in Dublin’s Commercial Court between Treasury Holdings and NAMA, and others, continues later today for what will be Day 6 of this preliminary hearing where Treasury is now just seeking a judicial review of its dealings with NAMA, having dropped the application for an injunction against NAMA’s receivers. Yesterday the parties started their closing arguments, and Mary Carolan at the Irish Times has a good report on yesterday’s proceedings which included KBC, which is a notice party in the case, making its contribution. Meanwhile on here, most of the Treasury Holdings affidavits have been obtained and are attached as follows:

Richard Barrett (Group Managing Director, Treasury Holdings) – affidavit here
John Bruder (Managing Director, Treasury) – Part One here and Part Two here
Niall O’Buachalla (Group Finance Director, Treasury Holdings) – affidavit here
and
Michael Cragg (economist, The Brattle group) – affidavit here

So what do we learn? Not surprisingly we get a different perspective on the deals brought to NAMA. Treasury had been, and NAMA alledgedly knew since 8th November 2011 that Treasury had been, in “active and ongoing negotiations” with third party investors, though it is implied that Treasury only told NAMA the names of the investors on 10th January 2012.  Elsewhere Richard Barrett says that it will be “at least 5 years” before any bank resumes development funding in Ireland. Yikes! It is Treasury’s suspicion that NAMA’s QIF initiative indicates that the Agency has its eyes on Treasury’s assets. And any developer out there should read Part Two of John Bruder’s affidavit for a good sense of the detail of NAMA’s interaction with developers on the verge of foreclosure. There will be a separate blogpost on Michael Cragg’s affidavit.

CIM
Richard Barrett describes the CIM deal as “frustrated” and claims it was NAMA’s “inexplicable” raising of the TAIL transaction which scuppered the deal. CIM first approached Treasury in June 2010, and Treasury says that on 3rd March 2011, it received “confirmation that the NAMA board had agreed the term sheet”. On 7th March 2011 NAMA raised the TAIL transaction and demanded it be reversed and CIM subsequently cancelled meetings with Treasury but regardless CIM submitted a new offer in May 2011 after conducting due diligence, and seeing the Irish market was continuing to tank and that Fine Gael’s Alan Shatter was pursuing changes to Upward Only Rent Review leases, the revised offer was much lower.

 

Macquarie
Approached Treasury via NAMA in mid 2011. The deal was comparable with CIM’s according to Treasury given what it claims was a 20% decline in Irish property prices in the 17 months between September 2010 and January 2012. Macquarie offered NAMA 35% of the value of “the development company” but presumably that means 35% of any profit on top of what Macquarie was paying. There is a claim that NAMA was also offered 7.5% on any value realised over €1.2bn.

 

Hines
There is little new detail given on the Hines approach. The negotiations between 10-25th January 2012 are derided as no more than requests for clarifications and Treasury complains at being excluded from interaction between NAMA and Hines.

 

Battersea
Treasury had contacted 220 potential investors, according to Richard Barrett who also believes NAMA acquired the loans for Battersea at a 20% haircut. Treasury say an investment offer from SP Setia had been secured to pay “the full 100% face value” of NAMA loans – elsewhere said to be GBP 124.4m (€147m) with interest accruing daily – but that NAMA/Lloyds decision to appoint administrators in December 2011 scuppered that deal. A swipe is made at Sean Mulryan’s development in adjacentEmbassyGardensin Battersea where Treasury say they “understand that NAMA have chosen to finance an adjoining site which is (sic) less attractive development prospect”.

Treasury’s finances
Allegedly on foot of NAMA’s decision to appoint receivers, “further demands under guarantees totalling hundreds of millions of euro have been served, all of which has the potential to impact on the remainder of the group with the loss of at least 45 jobs in Dublin” (Treasury employs 400 people worldwide, of which 300 are in Ireland). NAMA’s action may impact on the Chinese operation whose assets are owned by “hundreds” of parties, but which are managed by a company owned by Treasury in Dublin. Elsewhere we get an insight into Treasury’s engagement with other creditors which are ranked according to their importance to the business and dealt with accordingly.Bizarrely it seems that as late as December 2011, Treasury had unencumbered income over which NAMA “had sought but not yet taken a charge” REO is now 50.7% owned by Treasury. The company leased or sold 400,000 sq ft of office, retail and residential space in 2011 in addition to selling the 200,000 sq ft Montevetro building in south Dublin docklands to Google.

Interaction with NAMA
Treasury expresses some frustration with NAMA’s processes eg the Agency requires a so-called “Creditor Strategy” from developers but gives no guidance as to what such strategy should contain. Treasury say that changes to their projections in Nov/Dec 2011 came about as a result of what Treasury “was told by NAMA” in respect of accruals and non NAMA debts. So the implication on the NAMA side that Treasury’s abilities caused “considerable alarm” are a “distortion” as far as Treasury is concerned. Treasury’s main beef is that NAMA decided on 6th December 2011 to pull the plug, and indeed that decision might have been committed to even before that. Yet Treasury provided their finalised creditor strategy numbers on 7th December and were given the impression subsequently that the relationship was smoothly proceeding – though not so smoothly that the NAMA CEO didn’t return calls in December. It’s NAMA’s position that the Creditor Strategy was in fact received on 18^th November.

The Gossip
Treasury told NAMA in October 2011 that it would need make redundancies but NAMA refused to “deal with this issue until John Ronan repaid money to the Company which he had legitimately received as part of his remuneration” The legendary Form A used by NAMA to approve spending and which is now the stuff of developers’ night terrors are supposed to be dealt with by NAMA in two weeks but, according to Treasury, “in most cases however decisions took very substantially longer than 2 weeks and unfortunately in many cases decisions were never forthcoming despite Form A’s having been submitted as long ago as June 2011”. And in one case, a payment to a supplier, Treasury recently took the decision to pay an invoice without NAMA’s consent because of the time it alleges it takes NAMA to deal with Form As.

The Courts.ie service indicates that affidavits were filed by each of the following, but there are not yet available on here.

DAMIEN REVILLE (IBRC)
EDWARD DILLON (KBC)
DENISE BUCKLEY
RORY WILLIAMS (General Counsel, Treasury group)

And where is, you might ask, the affidavit for the colourful Johnny Ronan? There isn’t one, and you’ll recall that Johnny stepped down from Treasury Holdings in 2010 after his tabloid antics made the headlines. Having said that, he attended what seems like a crucial meeting with NAMA on 8th November 2011 along with Richard Barrett.

I leave you with Richard Barrett’s concluding statement in his affidavit : “Given our impeccable behaviour towards them, the early support and encouragement and my refusal to aid disgruntled NAMA debtors, I would have expected respect and a willingness to proceed and negotiate in a straightforward fashion”

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