Permanent TSB is not a NAMA bank. It was originally intended to be, but in the summer of 2009, the bank claimed to have no loans of the type NAMA was acquiring – land development loans. So PTSB stayed out of NAMA, though bizarrely, PTSB today holds NAMA bonds as a result of buying the deposits, and associated assets which included NAMA bonds, of Irish Nationwide Building Society in early 2011. PTSB has so far received a €4.1bn bailout from the State, of which €1.3bn was for the purchase by the State of Irish Life which may eventually be worth something when sold off. PTSB is 99.5% owned by the State.
And then this morning, we learn via the Irish Times, that PTSB is now seeking a manager for €2bn of what the newspaper calls “borrowings linked to office, retail and industrial developments – this is now a non-core segment of Permanent TSB’s business as a result of its plans to create a leaner, smaller bank free of the “legacy” issues of the property bubble” Aah, but isn’t this the type of loan for which NAMA was established?
You’d think.
Laura Slattery goes onto report the PTSB has decided the loans in question “commercial property loan portfolio should be outsourced, as the loans are not only non-core but they are typically stressed, meaning much of the portfolio will require the specialist skills of distressed debt managers”
The “specialist skills of distressed debt managers”? Isn’t this really the type of thing for which NAMA was established.
You’d think.
So it is weird that these loans weren’t previously transferred to NAMA which was set up to manage exactly this type of loan. And remember that NAMA has nearly €30bn of unused allowance for issuing nice cheap clean NAMA bonds to acquire these loans. And practically all NAMA’s profits are returned to the State. So, bearing all this in mind, you might have thought NAMA would be a dead cert to acquire these loans. But instead, the loans are set to be transferred to….
Certus, a private company set up in 2009 to specifically deal with Bank of Scotland (Ireland)’s legacy loans after that bank decided to exit the Irish market. Since its creation, it has taken on loan management contracts for mortgages at IBRC and AIB.
But why on earth would 99.5% state-owned PTSB use a private sector company, Certus, to manage loans for which 100%* state-owned NAMA was established? And why wouldn’t Minister for Finance Michael Noonan and his Department of Finance use this opportunity to reduce PTSB’s balance sheet and use the nice cheap unused NAMA bonds to bolster PTSB, which is not one of the two pillar banks?
It is not clear how much the contract is worth to Certus but it would not be unusual for an asset manager to charge 1-2% for loan management, or €30-60m per annum.
The spokesperson for NAMA and the spokesperson for PTSB, coincidentally one and the same company, public relations company, Gordon MRM – which gets two whole paragraphs in the new Shane Ross/Nick Webb book “The Untouchables – the people who helped wreck Ireland and are still running the show” – was asked for comment this morning….
* There’s a charade whereby 51% of NAMA is supposedly owned by independent third party investors, but the terms of the “investment” are secret and evidence coming into the public domain suggests that the “investment” is no more than a sham to avoid NAMA’s debt being classified by Eurostat as part of the national debt.
UPDATE: 2nd February, 2013. There is no press statement at present from PTSB but the Independent today reports that, as expected, the €2bn commercial property loans have in fact been outsourced to Certus, NOT NAMA.
NAMA Wine Lake 
The “specialist skills of distressed debt managers”.
And what might they be now, I ask myself?
So the very successful bank restructuring is now being restructured again.
Another pass the parcel episode by State agencies.
Fantastic move by PTSB. The State landed them with junk loans, sorry associated assets, from Finger’s Nationwide, in addition to a few NAMA bonds in part payment for the deposits they accepted from Nationwide.
Now PTSB (100% State owned?) is throwing these bad egg junk loans out the window. Smart move by PTSB.
Now where is the cost benefit analysis for all this. Presumably PTSB will save more than the cost that Certus will charge. Or will they?
They should be asked that question, shouldn’t they?
Or perhaps its just a case that the PTSB ‘State’ employees or public disinterested directors couldn’t be ar*ed with the hassle. Why would they? No money in it for them!!
NAMA’s flagged strategy is to underwrite the residential mortgage market, give staple financing and dispose of the assets at “break even” or better. The reality is that it has not achieved the two former objectives in any meaningful way and have no hope of achieving the latter. As an asset manager, the agency is a failure. Why would anyone have confidence in its loan or property management abilities?
Remember, if Nama were to buy the PTSB loans, it would need to issue bonds beyond the €30.5 billion it has issued so far. While Nama can issue up to €54 billion in Irish Government backed bonds, I suspect these will be a lot harder to justify as time goes by.
Don’t forget that Certus are the bones, nay skeleton, indeed entire body bereft of the skin of the Bank of Scotland Ireland, the clever chaps who used to run the loan book in Ireland. Say no more.
All of this misses the point. NAMA is a poor asset manager and it’s surely a safer bet for the tax payer to give it to experts. Certus has obviously passed the test with AIB and IBRC and presumably with whoever advses PTSB as the leak sounded like a done deal. My only question is are they experts or just former bankers trying to masquerade as an asset manager as none of the management, who effectively ran BoSI, seem skilled or experienced in this area? It also lost the management of Lloyds asset finance unit to another outfit recently which doesn’t sound too good a start. The government will also be intent on ensuring that Brussels doesnt think its conspiring against the foreign banks which Certus really is just an extension of anyway.
@Activist investor, there will be a feature in the not-too-distant future on Certus which has indeed won business from AIB and IBRC and now seemingly, PTSB. Some cynics might say that Certus employing blow-in Fine Gaeler Pat Cox as a special advisor was money well spent under the present regime!
It is not clear how Certus strategy and performance has majorly differed from NAMA’s – both seem to have disposed overseas as a priority, NAMA seems more keen to develop Irish assets and Certus has probably been flogging more Irish assets, but then again, BoSI doesn’t apparently want to hang around until 2020 like NAMA!
Ok, The acid test about asset managers in Ireland, are any of them any good? The issue is that we continue to use the same old same old- including Certus. And whats their track record? Ireland needs to get some real expertise not someone else just because we already know them.
Bank of Scotland Ireland was closed and its €30bn loan book handed to its Management (Certus)to run down over a period of 10-15 Years. One could argue that BOSI (Certus) were responsible for an acceleration in the lending frenzy (110% Mortages) in the tiger era. Now, AIB, IBRC and PTSB have handed portions of their distressed books to Certus too. What I cant seem to figure – and would welcome some of this forums wise counsel in the matter – is what makes Certus (BOSI) any more experienced than the rest of the institutions to manage a distressed book when Certus’ only claim to fame is that they managed to create a distressed book of €30 bn?????? is this a paddyism???
Certus / Lloyds employs Green Property Company to manage its property assets. Power has been taken from Certus in relation to loan write-downs. All settlement decisions are now made by Lloyds in London and they have started settling with the biggest loans first. They are so far ahead of NAMA, whose strategy is to hope that the market gets better. Not a realistic strategy – since they are the dominant player in the market.
@Nadia,one could argue that the CB and D of F were complicit in this with lite touch or a laissez faire approach to regulation.
Generally,it’s considered bad practice to have the person that originated the loan,attempt to fix it.
Keep in mind “asset management” is extremely difficult to scale.
If you are half decent with a track record,it’s relatively easy to raise capital with a back end piece to turnaround or asset manage distressed assets.
But then again apparently,the NTMA/NAMA has some incentive scheme for key employess and borrowers,must be getting a bit skinny for the taxpayer!
I htink you might be missing an important point here John. Certus is not necessarily an Asset Manager – they are a Loan Servicer (ask anyone in the Arrears support unit of AIB). My point is, the Management of BOSI who were as complicit as any of the indigenous Financial Institutions in creating the bust, are now portraying themselves as the experts in managing a distressed book. Their only (outward) credentials for this would appear to be that they are Certus rather than Bank of Scotland Ireland – a simple name change. Sure, they may have Lloyds platform to help them but The Indigenous institutions are now handing over portions of their books to Certus to manage them out. The irony is, what makes Certus any better than any of the Indigenous institutions to carry out this work when Certus’ only claim to fame is that they managed to create a €30bn problem in BOSI. You rightly point out that it is bad practice to have the persons who originated the loan, attempt to fix it. Now it seems that we have people who originated a €30bn problem fixing the problems of our Guaranteed banks. Even in this banana republic I find this particular issue to be stretching the bounds of credibility!!!!
@Nadia i actually agree they are basically a loan servicing outfit but was responding to the rational quoted for this decision..
“commercial property loan portfolio should be outsourced, as the loans are not only non-core but they are typically stressed, meaning much of the portfolio will require the specialist skills of distressed debt managers”
Further down I suggest exploring a JV,given the internal turmoil at NAMA,with the ongoing Farrell investigation are they fit and competent,to date their only ‘asset management’ has involved funding insolvent developers,who then hold NAMA’s hand-Google/Treasury.
It was somewhat reassuring to find none of the ‘usual suspects’ involved with Farrell,no NY hedge funds,blood on the streets types or giant octopus’s.
Get a ‘mark’ to sell it from the logical buyers and/or a proposal for a JV,include NAMA by all means.
But ‘outsourcing’ asset management of CRE is complete waste of time,it would interesting to bring in some real asset mangers with skin in the game into the market,Irish by all means but that should not be the only criteria.
The issue remains whether Certus are better placed to manage this book out. The guys behind Certus have remained conspicuously quite but a little digging and they seem to be the same guys broadly that ran BoSI the “suitcase bankers” as PTSB’s David Went used to fondly call them which is an irony. However, in fairness they seem to be doing an ok job but who are they-the taxpayer deserves to know more? Why did they recently loose Varde’s, the private investor’s business, who were the buyers of Lloyds motor book and what does this tell as rumours abound? So are they qualified? Is their platform as good as others-it viewed see as a standard banking rather than special situations platform thats the norm for these type of situations. Their management put themselves forward in media stuff as more retail than commercial bankers, presumably to distance themselves from the past, so are they sufficiently knowledgeable as they can’t have it both ways? And do they actually own their platform or as rumoured it’s actually owned by Lloyds who call the shots now, are effectively owned by the UK government and will always get first priority/free peep here. I wonder that there aren’t better providers with fewer issues around?
@Activist investor,selling it given current pricing not a very palatable option.
Have they explored a joint venture,with profit participation?
Best guys to do it will be doing it for themselves with OPM and incentives,why add value for fees.Good asset managers look in the mirror every morning and say,what’s in it for me today.
Given that the bubble in Irish CRE was so prolonged,does anyone have any work out expertise or asset management skills.
NWL suggested NAMA,with his indept and comprehensive coverage he may have gotten captured,if I was going away for the weekend I would not let NAMA manage my dog,they would probably lose it.
How will all of this activity effect PTSB shares long term, will the bank be run down and wound up ?
Pat Cox will have big pensions from his various positions in polities (Ireland and Europe) Who appointed him to Certus, and who are Certus, and what is their experience/track record?
Obviously, somebody thinks that there is a profit to be made on this “distressed mortgage” business if they can afford Pat Cox. Will it mean a heavier boot on people struggling with their debts as PTSB will have shifted bad publicity in recovering these debts to an outsourced/ debt collection agency. Taking away the smokescreen, they appear to be a mini-Nama, so why not let Nama manage it instead.
Pat Cox will have big pensions from his various positions in politics (Ireland and Europe) Who appointed him to Certus, and who are Certus, and what is their experience/track record?
Obviously, somebody thinks that there is a profit to be made on this “distressed mortgage” business if they can afford Pat Cox. Will it mean a heavier boot on people struggling with their debts as PTSB will have shifted bad publicity in recovering these debts to an outsourced/ debt collection agency. Taking away the smokescreen, they appear to be a mini-Nama, so why not let Nama manage it instead.
The letters have arrived from Certus!