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NAMA’s main Irish competitor posts half year results

August 24, 2012 by namawinelake

“A significant exercise in cost management has also been completed, particularly in the area of legal expenses attributable to ongoing litigation matters.” IBRC report  report for the six months ending 30th June, 2012 which highlights the potential for synergy from closer co-operation/co-ordination with NAMA

Our National Asset Management Agency, NAMA isn’t a unique species at all, and has plenty of domestic and international competitors. Okay NAMA is an asset management company which has a fixed expiry date of 2020 and that is unusual, as is an asset management company that doesn’t purchase new assets and in these straitened times when there is a credit drought, NAMA is certainly unusual for having access to €25bn+ of state-guaranteed funding at less than 1% per annum. Nonetheless, NAMA’s main competitor by size in Ireland is probably Bank of Scotland (Ireland) and its asset manager, Certus. But NAMA’s closest competitor in terms of method of operation is IBRC, the company formed last year from the merger of Sean Fitzpatrick’s Anglo and Michael Fingleton’s INBS, because like NAMA, it has an imminent expiry date – which we learn today is, like NAMA, 2020 – it doesn’t acquire new assets and it is 100% owned, and funded by, the State. Today, it published its report and accounts for the six months ending 30th June, 2012.

The news from IBRC is not good with a further €742m loss after tax and a loss after all recognised income/loss of €504m. IBRC’s equity is down to €2,734m, even after having received a €34.7bn bailout from the State. In other words, if there are another €2.7bn of losses incurred then we will be on the hook for further bailouts. And with the H1, 2012 results and a challenging immediate outlook for Irish property added to anaemic domestic economic growth, you would have to be anxious.

What might transform anxiety to terror is the little item buried in Note 38 to the accounts at the veeeery end of the report. IBRC lost a court case in London’s High Court in July 2012 which means that it must repay a junior bondholder the sums haircut in a bond redemption. The case has been appealed by IBRC, but if IBRC loses the appeal, then it is likely to be exposed to claims that may be in the billions from other disgruntled junior bondholders whose bonds were subjected to haircuts. And so too, by the way, might AIB and Bank of Ireland.

IBRC is also currently recognising nearly €900m for NAMA subordinated bonds which will only be honoured if NAMA makes a profit by 2020, and NAMA is at this stage forecasting a breakeven WITHOUT HONOURING THESE BONDS – in other words, NAMA doesn’t think it will make a profit which will allow these bonds to be redeemed and that is at odds with what IBRC thinks.

IBRC’s CEO, Mike Aynsley and chairman, Alan Dukes have previously indicated that when IBRC is wound down, it may in fact return €4bn to the Exchequer on the basis of the cost of Anglo being €25bn compared with the €29.3bn bailout given to it (remember INBS received an additional €5.4bn, meaning IBRC in total has received €34.7bn). At this stage, not only would you have to be very sceptical about IBRC returning ANYTHING to the Exchequer when it is wound down, but you would have to be concerned that we will be called upon for further bailout funding.

A subject examined on here before is the potential to merge NAMA and IBRC, and the comparative spreadsheet has been updated to show how similar these two organisations are. There are definite synergies in merging the two organisations, and we might see cost savings in NAMA if IBRC’s vaunted “cost management exercise” alluded to at the top of this blogpost were adopted in NAMA. It is probably one of a thousand synergies.

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Posted in Banks, Irish Property, NAMA, Politics | 6 Comments

6 Responses

  1. on August 24, 2012 at 2:23 pm otto

    “There are definite synergies in merging the two organisations, and we might see cost savings in NAMA if IBRC’s vaunted “cost management exercise” alluded to at the top of this blogpost were adopted in NAMA. It is probably one of a thousand synergies.”

    I dont agree: one of the oddities of discussion of politics and administration in Ireland is the one-club-golfer obsession with amalgamation and mergers, as if there were no other form of management change. E.g. merge the competition authority and the consumer protection agency, merge the hospitals, merge the universities etc, all without any real plan for changing the activities to be performed by these organizations or the ways in which they would be delivered. None of these possible amalgamations are substitutes for good management, all would involve enormous transition costs, all would tend to reduce permanent pressures for good management which can be maintained by comparisons and competition across different organizations, whereas one monolithic organization dominating a particular activity can often manage information flow to the outside world much more effectively.

    If NAMA wants to benefit from IBRC’s litigation expense “cost management exercise”, the obvious way forward would be for NAMA to hire someone from the IBRC who was involved in the process and ask them to do the same for them.


  2. on August 24, 2012 at 5:33 pm who_shot_the_tiger

    @NWL,
    A telling statistic in your table is the impaired loans figure. It is 80% for NAMA in FY 2011 and 61% in FY 2011 rising to 66% in HI 2012 for IBRC. It is an area in the IBRC books where they were apparently in denial and are now “salami slicing ” the bad news to us over the next 2 years. I would expect to see the two averages merge, with consequent further losses to IBRC. An interesting one to watch.


    • on August 24, 2012 at 5:42 pm namawinelake

      @WSTT, I think if we had known three years ago that after the NAMA process, IBRC would (a) have 66% impaired loans and (b) would be in wind-down mode, then we mightn’t have had a NAMA. Remember €44bn of NAMA’s €74bn loans came from Anglo/INBS. Certainly in the case of IBRC, NAMA “has not worked”.


  3. on August 24, 2012 at 7:57 pm john gallaher

    @WSTT enjoyed your bon voyage post a lot,no surf in Montauk today,best break on the east coast.
    Try the big apple its fun,all the best.Its Friday afternoon sun is shinning cold beer awaiting,take care of yourself.


  4. on August 24, 2012 at 10:46 pm Bunbury

    “… the potential to merge NAMA and IBRC together, …”. Ouch! Pleonasm alert.


    • on August 25, 2012 at 6:12 pm namawinelake

      @Bunbury, I’m torn on this one, because you are strictly right and “together” is redundant with “merge” but in presenting written material where the reader is depending on you for clarity, words that might be technically redundant help reinforce and confer meaning. But upon mature reflection, in this case grammar probably trumps clarity because of the context and length of the sentence. So, correction made, thank you!



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