Minister for Finance Michael Noonan refuses to tell us the book value of IBRC’s loans at the end of 2012 and he also refuses to tell us if any borrowers have yet refinanced their loans out of IBRC since that “bank” was placed in special liquidation on 6th February 2013. We DO know that the independent valuation of IBRC’s loanbook by PwC and UBS should be completed shortly and that loans with par values of over €10m will be offered to the market, and if the highest bid is in excess of the independent valuation, then the loan is sold and if not, it will go to NAMA. The transfer to NAMA was to have taken place in August 2013, but that date is likely to slip and may even be the start of 2014. In June 2012, IBRC had loans with a written-down book value of €16bn, so NAMA will be taking over up to €16bn of loans; that may have a significant impact on NAMA which itself had €22bn of book value loans at the end of 2012.
But NAMA might shortly be receiving a wodge of loans from another source: Permanent TSB.
Permanent TSB has created an internal business unit called the “Asset Management Unit” into which €14bn* of nominal value loans have been shoveled. “Nominal value” means par value, for example if PTSB loaned John €100,000 for his house and he currently owes €90,000 then the nominal value or par value is €90,000. John might have fallen into arrears and his house might be worth only €60,000 so PTSB might have made a provision of, say €20,000 as an estimate of the value which it won’t recover on the loan. So the written-down or book value of the loan might only be €70,000 – the par value of €90,000 less the provision for a loss of €20,000. We don’t know the written-down or book values of the €14bn of nominal value loans in PTSB’s AMU.
At the end of 2012, PTSB had an overall total of €35bn of nominal value loans – see extract from the notes to the accounts above – so the AMU represents just under half of the PTSB loanbook. It is understood to mostly comprise commercial property loans (€2.2bn in total in PTSB, most of that is probably in the AMU) and loss-making tracker mortgages. We don’t know the impairment provision attaching to the AMU loans but the overall total provision in PTSB at the end of 2012 was only €3bn so the book value of the AMU will be €11bn-plus.
PTSB wants rid of its AMU because the uncertainty of what lies within, is dragging down the rest of the operation and preventing the bank from getting back on its own two feet. However, if the AMU is transferred to NAMA, then NAMA will only pay the current market value of the loans, and PTSB is likely to see a colossal additional loss, probably in the billions. NAMA will also end up managing problem mortgages, which is not what was originally envisaged for the agency.
We are likely to soon hear what is to happen to PTSB’s AMU.
*The €14bn was confirmed in a PQ this week here.