Nama 'to make profit of €1bn'

 

The National Assets Management Agency (Nama) is expected to make a profit of €1 billion over 10 years but could make a loss of up to €800 million, it said today.

The agency originally said in October it expected to make a profit of €4.8 billion with 40 per cent of the loans it acquired from financial institutions generating income.

However, in its revised business plan published today, the agency said it expected that only 25 per cent of the loans would make money.

The agency said the return from loans could be as high as €3.9 billion if economic conditions improve or it could suffer a possible loss of up to €800 million in the worst-case scenario.

An analysis of the first tranche of loans transferred shows the loan-to-value ratios (LTV) are higher than those indicated by the banks last autumn.

Minister for Finance Brian Lenihan said if Nama does make a loss the Government will recover the money through a surcharge on banks.

“While it is still too early to be definitive about the final discount to be applied to the transferring loans, the business plan confirms that Nama expects to pay about €40 billion for loans with a book value of €81 billion,” he said. “This would represent a discount of 50 per cent, which is consistent with my statement of the 30th of March last.”

He added that Nama remains on schedule to complete the transfer of loans by February next year. The Minister said the projections are for a plan over 10 years and that the figures would likely change over this period.

Speaking in the Dáil this afternoon, Taoiseach Brian Cowen said the agency would make a profit "somewhere in the order of €1 billion".

He said there had been some misunderstanding of the Nama plan in advance of its publication. "It is not true to say that Nama expects to make a loss," he added.

He said that there were three scenarios set out in the Nama plan. Under the central scenario, which was based on current expected asset-recovery value, Nama was projected to make a profit. The other two scenarios were variations of the central projection: one in which it made a larger profit and one in which it made a loss.

The Taoiseach was responding to Labour leader Eamon Gilmore who said the Government had claimed Nama would make a profit of €4.8 billion. However, if reports were accurate, that could turn out to be a loss of several hundred million euro.

He asked if it was the case that the original business plan presented for Nama had turned out to be "a financial fairytale".

During the period from January 1st up to March 31st, Nama incurred a loss of €7 million. This was partly due to once-off costs incurred in establishing the agency. Income was only generated over a two day period from a relatively small portfolio of loans. As later tranches transfer, the income is expected to increase to offset costs.

In the first quarter, the agency acquired loans with a book value of €814 million from Irish Nationwide and EBS for €371 million, at a discount of 54 per cent.

Fine Gael said the business plan highlighted the massive risk being taken by the Government.

Finance spokesman Michael Noonan said: “Loans to NAMA are deteriorating so quickly that their future value is almost entirely unpredictable.

“The rate of deterioration in the estimated quality of the loans being transferred to NAMA highlights the huge risk from NAMA for taxpayers.

“Irish taxpayers should never have been forced to take on the risk and responsibility of recovering loans which were dished out by reckless bankers.”

Labour Party finance spokeswoman Joan Burton said that clearly the first Nama draft plan had been “a fantasy”.

“It is difficult to seriously believe the revised plan except in so far that it means more pain and no gain for Irish taxpayers,” she said.

“While Nama has transferred big bad assets from banks to the taxpayer, the banks, which have been the recipients of this largess, are still effectively closed for credit. We have a credit famine for SMEs and indigenous Irish businesses who rely on our banks. This alone is continuing to cost tens of thousands of job losses, as small businesses yield to the inevitable and close up shop and other SMEs never get off the starting blocks.”