IRISH NATIONWIDE suffered the largest discount in the second wave of loans sold to the National Asset Management Agency due to writedowns of up to 90 per cent on loans provided for speculative land purchases where no planning approval had been secured.
The building society took a 72.4 per cent writedown on €591 million in loans sold to Nama in the second tranche linked to 23 borrowers in the tier below the 10 biggest development borrowers.
In many cases in the second tranche, Irish Nationwide had provided high loan-to-value financing to developers on their highest-risk projects. Much of the land was on the fringes of the big borrowers’ portfolios and highly speculative in nature, provided with no personal guarantees from the customers, said a source familiar with the building society’s lending.
Heavy discounts were applied to these loans – some of which were provided at 100 per cent of the property’s value and where there was significant interest roll-up.
There was also a high incidence of loans provided to finance acquisitions at inflated purchase prices.
All of the loans were provided on projects in Ireland. Four large loans were written down severely – Nama applied a haircut of 90 per cent on one and 85 per cent on another, driving up the average.
In most cases, the land was purchased where there were assurances that planning permission would be secured and the value of the land would rise sharply.
Irish Nationwide had provided loans to a “limited” number among the 23 borrowers transferred in this latest tranche.
The discount came in above the 58 per cent writedown taken by the building society on the first €670 million in loans owing by top 10 developers whose loans were sold to Nama in March and April.
There were no loans provided on UK land and development projects in the second tranche.
Irish Nationwide is expected to transfer large numbers of UK loans to Nama in the third and subsequent tranches. The value of loans in the third wave is likely to exceed the second wave of loans.
Some €818 million has been written off €1.26 billion of loans sold by the building society so far.
The society wrote off €2.8 billion in loans in its 2009 accounts.
Nama has said it plans to purchase a total of about €9 billion in loans from Irish Nationwide before February 2011, the deadline set by the European Commission for the transfer of €81 billion Nama-bound loans from the five participating financial institutions.
Irish Nationwide has said that if discounts rise on later loan transfers, then the building society may need more than the €2.7 billion committed by the Government.
A well-placed source said it was premature to say whether the capital bill at the building society would rise as the discount was likely to change on the remaining €7.5 billion loans to be acquired.
