Archive for October 16th, 2012

If you’re having an annual review and agreeing your objectives with any half-decent manager, you will know what SMART stands for – Specific Measurable Attainable Realistic Timebound. Instead of having some nebulous objective which you don’t understand and which can’t be objectively measured, you agree meaningful objectives and at the end of the year, you and your manager or staff can agree if objectives have been met. It’s standard stuff.

But NAMA HQ is a SMART-free zone, and today the Agency has published its objectives for 2013 and lo and behold, there’s not a specific target or measurable objective for the 12 months of 2013 at all. It’s a good job that the senior folks at NAMA waive their bonuses because otherwise there could be a real bunfight over whether or not objectives had been met.

In fairness, there is one metric in the objectives – NAMA does estimate its operating costs in 2013 will be €140m, down from what NAMA says was €167m in 2012. In fact, NAMA’s budget for 2012 was €194m, but it seems that NAMA is conveniently ignoring receivership costs and is deducting these from proceeds of sales at companies to which receivers have been appointed.

NAMA is continuing to recruit and now employs 206 staff directly from the NTMA who are involved in the disciplines shown below (in brackets) plus 550 staff who manage smaller loans at AIB, Bank of Ireland and IBRC plus an army of service providers.

As for the objectives, they can be summarised as “NAMA will do its best”


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NAMA committed itself to producing impairment estimates twice in 2012, firstly at the half year stage which is an innovation and secondly in the year end accounts, as is usual. Today NAMA’s report and accounts for the quarter ending 30th June 2012 were published and there is in fact a €128m impairment charge for Q2,2012. The “impairment charge” is the estimate in the decline in the value of NAMA loans, occurring in part as a result in the continuing decline of property prices in NAMA’s main market, Ireland where commercial fell 4% in H1, 2012 according to Jones Lang LaSalle and residential fell 6% according to the Central Statistics Office. The estimate on here was that the impairment charge would have been €300-400m, the actual impairment charge of €128m looks low.

So, what do the report and accounts tell us? This is a flash commentary, there will be a detailed commentary tomorrow.

(1) NAMA made a profit of €89m after impairment of €128m in Q2, 2012. That’s a better result than the €133m in Q1, 2012, a quarter in which there was no impairment charge. For H1, 2012 NAMA has notched up a profit of €222m which is reasonably impressive, but because NAMA hides behind “effective interest rates”, there is always a suspicion that the underlying performance is poor. But on the face of it, a very good result.

(2) The % of NAMA loans – by reference to the original loan values – that is performing is 19%, unchanged from Q1, 2012 but this includes restructured loans. NAMA doesn’t produce a performing % by reference to the original loan agreements but the estimate on here is that just 15% is now performing by reference to the original loan value and original loan agreement, it was 17% in Q1,2012.

(3) NAMA’s operating costs continue to be waaaay below budget which for 2012 was an annual cost of €194m. NAMA’s operating costs for H1, 2012 come to just €53.1m. NAMA spent just €23,000 on legal fees in Q1,2012 and in the Q2, 2012, legal fees came to just €887,000. Remember NAMA had a budget for legal fees of €25m in 2012. NAMA spent a whopping €566,000 on IT in Q2,2012 which will prompt some wry smiles given the IT failings that emerged in September 2012 in the Enda Farrell scandal.

(4) NAMA has taken possession of an additional €400,000 of “non real estate property” in Q2,2012 bringing its total property, including houses handed over in settlement of personal guarantees, to €7.2m – remember nearly all the loans NAMA has foreclosed have resulted in receivers overseeing the property – NAMA itself has very little property.

(5) NAMA has a healthy cash position (still) with €900m received from debtors during Q2, 2012 – this includes interest, normal repayment of loans and sale of properties with proceeds paying down loans.NAMA had €3bn of cash on hand at the end of Q2, 2012.

(6) NAMA has advanced €863m to debtors and approved an additional €470m which hasn’t been handed over yet.

There will be a detailed analysis tomorrow but this looks like a good result in Q1,2012.

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