Archive for April 18th, 2012

Speaking in the Dail a short while ago, the Minister for Finance Michael Noonan announced NAMA’s preliminary results for 2011 as follows

Operating profit €1.01bn

Impairment charge €0.81bn

Net profit €200m

Remember these are the results from the 2011 management accounts and we won’t get NAMA’s annual report until the summer. Last year NAMA’s impairment charge in the management accounts was €1.0bn but rose to €1.485bn in the annual report.

The NAMA CEO, Brendan McDonagh told Neil Callanan of Bloomberg last week that the public might be “pleasantly surprised” by the 2011 impairment charge.

The announcement will raise some eyebrows.

Brendan McDonagh told aLondon meeting of Irish chartered accountants a month ago that the 2011 operating profit would be “at least €750m”, and although it is true that €1.01bn is “at least €750m”, there’s quite a difference.

Based on underlying asset values, the expectation on here was that the impairment charge in 2011 would be greater than the €1.485bn booked in 2010. According to the CSO, Irish residential property declined by more in 2011 compared with 2010, commercial saw almost the same decline and in the UK growth was more muted in 2011 compared with 2010. So there are some especially raised eyebrows here.

Minister Noonan also said he saw signs of the (Irish, presumably) property market stabilising.

No word on when the full management accounts for 2011 will be published. Last year they were published on 5th May.

UPDATE (1) : 18th April, 2012. The results announced by Minister Noonan today suggest that NAMA made an operating profit of €484m in Q4,2011 which when added to the nine-month operating profit to the end of Q3,2011 would give a full year operating profit of €1.01bn. €484m is a considerable quarterly operating profit but remember that NAMA is disposing of an average of €750m of loans and property per month every month at original par values, so we don’t hear about most NAMA transactions. We do know that David Daly redeemed some €470m of borrowing at par in December 2011, though we don’t know what NAMA paid for those loans. So the operating profit looks high compared with the first nine months of 2011, but well done to NAMA if it is confirmed.

UPDATE (2): 18th April, 2012. NAMA is not going to be making a statement on the Minister’s announcement, so it seems as if we need wait until the management accounts for 2011 – which have been sitting on Minister Noonan’s desk since at least 31st March 2012 – before we learn any more about the €200m profit. For the time being the results mean that NAMA will not need more capital, that NAMA will probably pay interest on its subordinated debt in 2011, that NAMA will pay a dividend to the three “independent third party” investors and some pressure may come off NAMA which has been embattled in recent months for its legal, administrative and financial performance.


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Although not confirmed by Ulster Bank when first reported on here last month, it seems to be accepted that the bank is indeed proceeding to dispose of a €1bn exposure to Irish property. It is now understood that Jones Lang LaSalle is set to be appointed to take on the marketing of the property, though it should be stressed that the Dublin-based office of the global property services giant had no comment on the matter this morning. JLL Ireland booked revenue of €9.2m in its last accounts for 2010, so if this appointment is confirmed, it might have a major positive impact on the firm’s finances.

It is further understood that the €1bn figure cited for the Ulster Bank sell-off is the par value of the outstanding loans, and that the underlying property might only be worth €200-250m. Commercial property in Ireland has fallen by an average 65% from peak according to JLL’s quarterly index published yesterday and residential property is down 49% from peak according to the CSO. Having said that, these are average indices and it seems that Ulster Bank’s sell-off will contain a lot of dross, bolstered with the odd pearl and there may be unpaid rolled-up interest in the €1bn figure; still, a 75-80% haircut is sobering on a major portfolio.

What is causing major anxiety to borrowers at present is that their enquiries to the bank about the sale, and whether or not their property is included, are being met with a “we don’t comment on media speculation”, which is unhelpful to those borrowers currently trying to make plans to maximise returns from their assets so as to repay Ulster Bank.

NAMA paid €9.25bn for loans relating to Irish commercial property, though the value has dropped more than 20% since the NAMA valuation date of 30th November 2009 – the quarterly decline in Q1,2012 alone reported by JLL yesterday will have knocked about €125m off the NAMA portfolio. The Irish commercial property market was worth less than €0.5bn last year so the supply side of the market is set to become quite crowded quite soon, though it should be said the Ulster Bank property consists of both residential and commercial property..

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