Ah remember the innocent old days of 2009 when NAMA was just a glint in Peter Bacon’s eye? The assumption was that loans extracted by NAMA from the banks would see the banks crystallising losses of €23bn, after an average 30% haircut – we were so innocent in those days that even the term “haircut” meant something different. And you might also recall the assumption in the draft business plan published in September 2009 that 40% of the loans acquired by NAMA would be performing. Since then, NAMA has actually forced €42bn of losses on banks and we have been constantly disappointed with NAMA reporting fewer and fewer loans performing, and in its most recent report and accounts for Q4, 2011, the Agency said that only 20% were performing, down from 21% the previous quarter. Alas it seems that even this was an overstatement.
In the Dail this week, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan for the up-to-date statistic on NAMA performing loans, but this time he asked for the statistic by reference to the original loan contract. And it turns out that just 18.4% of NAMA loans, by reference to the original contract and by reference to the original loan value, are performing. NAMA has restructured some loans and these account for another 1.6% of all NAMA loans which is why NAMA claimed to have 20% performing loans. The full exchange in the Dail is here (with emphasis added)
“Deputy Pearse Doherty: further to the publication by the National Asset Management Agency of its 2011 management accounts and its report for the fourth quarter of 2012, the proportion of performing loans held by NAMA by reference to loan nominal values excluding the effect of any restructuring of loans following acquisition by NAMA. [27943/12]
Minister for Finance, Michael Noonan: The NAMA Report for the fourth quarter of 2011 confirms that of the loans transferred to end December 2011, 20% of the nominal debt was classified as performing and 80% was reported as non-performing. This is a disimprovement on the third quarter when 21% of the nominal debt was classified as performing and 79% was reported as non-performing. NAMA advises that performance can only be accurately measured based on the terms and conditions recorded on participating institutions’ systems at the reporting date. The overall performance was reported as being 20% at end 2011. However, based on an analysis of the performance profile of these loans prior to the restructure event and comparing it to the performance profile at 31 December 2011, the Agency advises that the impact of debtor restructures on the performance of the portfolio to be a positive 1.6%. Accordingly, the proportion of performing loans held by NAMA by reference to loan nominal values excluding the effect of any loan restructuring is estimated to have been 18.4% at end-December 2011.
It should be noted that as NAMA divests itself of assets it is more likely to be selling performing assets and therefore each disposal will mean that the percentage of performing assets in the remainder will fall, even where no material change has occurred in that status of the remaining assets.
NAMA is continuing to address the issue of non-performing loans in the course of the Debtor Business Plan process. The outcome of NAMA’s deliberations on the viability of a Debtor’s business plan will determine whether these delinquent loans will be enforced or re-financed on new terms set by NAMA. It should also be noted that where Debtor Business Plans are agreed, the loans may be restructured and the performance profile of the overall loan book will change as performance is assessed against the restructured loans. The restructuring of loans will not reduce the amount owed to NAMA.”
So not only is the current number worse than previously thought, but it is likely to deteriorate further as NAMA selected a strategy to dispose of better quality loans first and these tended to be better performing. What this means for NAMA is that its current healthy cash flow which means the Agency is sitting atop a €5bn cash mountain – or at least it will be next week if Bank of Ireland shareholders give the greenlight to the controversial Anglo promissory note loan arrangement – but as time progresses, NAMA will find it harder and harder to generate cash, not just to redeem NAMA bonds but to pay its own operating costs and interest. The revelation this week should act as a wake up call now.
NAMA Wine Lake 
Reblogged this on Brian M. Lucey and commented:
remember, this rate was 21% as late as late 2011…..
In a stable,declining and benign rate environment,scary stuff.If you look at NAMA as somewhat of a large CMBS pool-resi inc.-the delinquency rate is simply astounding.Above 10% was hit recently,headline grabbing,NAMA looking at over 80% rate,wow!
Be great to get the rate for commercial loans,as in fairness NAMA includes not sure but maybe,9,000 resi units and land.
“May 2012 U.S. CMBS Delinquency Report: Rate Hits All-Time High in May. Rate Surpasses the 10% Level as Delinquencies Increase for the Third Straight Month. ”
http://www.trepp.com/knowledge/research/
@NWL, I hate saying it, but……. “I told you so!”
@NWL, BTW, NAMA has now given discretion to its operatives to deal at discounts on acquired values of up to 20%.
It will be surprising and scandalous to the “Irish taxpayers” but it is just acceptance of the inevitable. And, it needs to be said, it is a direct result of the amateur mismanagement of the portfolio to date.
@WSTT, so Irish residential has declined by 29.9% since November 2009 according to the CSO and Irish commercial has declined by 22% since November 2009 according to Jones Lang LaSalle (backed up by SCSI/IPD). NAMA paid an average of 9% long term economic value on top of the market values. And NAMA might do deals with discounts of up to 20%? Or to express it another way. If the property was worth 100 in November 2009, NAMA will have paid 109 for the loan including long term economic value. The property is worth 70 (residential) to 78 (commercial) today. And NAMA will do you a deal at up to 20% off 109 or no less than 90?
@NWL, I know… and we don’t need the help of OMF to figure out the reason why no sales are being made! (no disrespect to OMF’s mathematical expertise intended) :-)
A current ‘definition’ of performing would we be helpful,breach off LTV ratios included,maturity default or simply payment or lack off ?
NAMA was at pains to explain that it was not a toxic dump,stuffed with garbage loans,they ‘claim’ that over 70% of their portfolio is capable of producing income.
“Total completed 12.61 0.92 7.58 1.36 22.47 70.7%”
http://www.nama.ie/about-our-work/key-figures/
There is a further 9% classified as ‘development’,so its conceivable w/o having to put a shovel in the ground that 80% is capable of producing income and servicing loans.
If you reverse the terminology,82% of NAMA’s loans are delinquent,assume that’s 90 days w/o payment ?
So for every 100million lent by Irish bankers 82million is now delinquent,astounding that there have not been any class action lawsuits,this is gross negligence and incompetence off epic proportions.Specifically,in that 70% are income producing assets,back of a beer-mat lending on a legendary scale,one for the textbooks or the courts !
Forget “performing”. I reckon only ~50% of Nama properties are even in sale-worthy condition at this point. Such has been the deterioration of abandoned buildings over the last five years, I would say that a lot of Nama loan properties are basically green fields by this stage.
@NWL witty reply to WSTT,but you are ignoring the impact of asset management in your utilization of index’s to benchmark,is that not the point of NAMA!
OMF you may have to change your non de plume,check out above link.
Land a/c’s for 20%, inconceivable mathematically and statistically.
“Land 4.17 0.28 1.85 0.16 6.46 20.3%”
I remember clearly the 40% figure for bank loans transferred which were “performing” according to NAMA.
Each subsequent pronouncement by NAMA has seen that performing loan figure decrease each and every time.
I think John Gallagher’s suggestion of inverting the figure to capture the percentage of non-performing loans at NAMA at 82% is a better idea.
This figure might focus some minds.
And remember NAMA told all and sundry that they conducted exhaustive due diligence of these loans BEFORE they bought them from the banks.
Statistics that say
70% income generating assets, 82% delinquent loans
seems to imply that a restart is in order, and back to punts or some other catastrophic event would actually be a good thing for this sector of the economy and probably others too,