Nama profits may boost State’s ‘rainy day fund’

Noonan signals possibility after agency raises lifetime surplus forecast to €2.3bn

The National Asset Management Agency raised its lifetime surplus forecast to €2.3bn after reporting its net profit had soared almost 300% last year to €1.8bn. Photographs: The Irish Times

The National Asset Management Agency raised its lifetime surplus forecast to €2.3bn after reporting its net profit had soared almost 300% last year to €1.8bn. Photographs: The Irish Times

 

Some of the profits from the National Asset Management Agency (Nama) may be used for a so-called rainy day fund to shore up the State finances against future shocks, Minister for Finance Michael Noonan has signalled.

He was speaking as Nama raised its lifetime surplus forecast to €2.3 billion after reporting its net profit had soared almost 300 per cent last year to €1.8 billion.

The lifetime target, which has been increased a number of times in the past year amid an improving economy and property market, may rise further.

The agency was sitting on €1.3 billion of unrealised gains at the end of last year, which stand to be recognised before the agency is wound up, according to chief executive Brendan McDonagh.

Mr Noonan said: “We’ve committed that windfall gains like this would be used for reducing the [State’s] debt, but it’s also part of the new programme for government that we’d establish a contingency fund – a rainy day fund.”

Buffer

He said some Nama profits could be used to shore up this “buffer” in the event of another economic downturn.

While Fine Gael committed to a €2.5 billion rainy day fund as part of its pre-election manifesto this year, the programme for government does not give a target size.

The Irish Fiscal Advisory Council yesterday welcomed the plan for such a fund, which would help the Government avoid the need for forced austerity in the event of a sudden loss of access to financial markets.

“Nama has come a long way since it was set up,” said its chairman Frank Daly. It was set up in 2009 to buy €74 billion of the banks’ risky commercial property loans.

“The debate has changed dramatically from how much Nama will lose over its lifetime to how big its surplus will be,” Mr Daly said.

Nama’s annual report showed it generated €9.1 billion in cash during 2015, with €8.5 billion coming from asset disposals. It is currently in the process of selling three large portfolios, known as projects Emerald, Ruby and Abbey, with a combined nominal value of €5.35 billion.

Mr McDonagh said the winning bidder for projects Emerald and Ruby, where US private equity funds Cerberus, Lone Star and Oaktree are known to be the final bidders, will be announced on Friday.

Loans

Nama has redeemed more than 80 per cent, or €24.6 billion, of the senior government-guaranteed bonds it gave the banks to cover almost all of the cost of the loans it bought during the crisis. By the end of the year, the amount of senior bonds outstanding will be reduced to €3.6 billion.

One of the remaining major projects facing Nama is the development of a large swathe of Dublin docklands that has been designated by the Government as a strategic development zone. Land in the area under the control of Nama receivers can ultimately deliver 3.8 million square feet of commercial space and about 2,000 residential units.