Business Irish

Friday 29 August 2014

Dan White: Nama's Irish property woes set to continue

Dan White

Published 25/11/2012 | 05:00

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LAST week's sale of a €1.8bn tranche of Irish property loans by UK bank Lloyds at just 10 cent in the euro almost certainly means that Nama will have to take a further haircut on its €17.5bn Irish property portfolio.

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On Monday, UK bank Lloyds, the parent company of Halifax and Bank of Scotland (Ireland) announced that it had reached an agreement to sell a "particularly distressed" portfolio of Irish commercial property loans to Apollo Global Management.

The loans, which had an original value of £1.46bn (€1.81bn), were sold for just £149m (€186m), a discount of almost 90 per cent. The portfolio generated losses of £202m (€252m) for Lloyds in 2011 and the bank was clearly ready to take whatever it could get.

So what does Lloyds' decision to take such a severe haircut mean for Nama, the repository for virtually all of the property-backed loans made by the Irish-owned banks during the Celtic Tiger era?

At the end of 2011 Nama had property assets, which it valued at €32.4bn, on its books. Over half of these properties, €17.5bn worth, were in the Republic. Word from Nama is that following "aggressive" writedowns, €1.48bn in 2010 and €1.26bn in 2011, it is not expecting more nasties to crawl out of the woodwork.

But is Nama being too optimistic? While it has benefited from the recovery in the London property market, it is difficult to resist concluding that there is more bad news to come on its Irish portfolio.

Particularly vulnerable must be the 23 per cent (€4bn) of Nama's Irish portfolio tied up in land. The 21 per cent (€3.65bn) accounted for by residential property, aka "ghost estates", the 13 per cent (€2.26bn) designated as "other investment" and the 6 per cent (€1.04bn) falling into the development category are also suspect.



Did NTMA over-egg State Street huff?



JOHN Corrigan's bare-knuckle tactics have left white-shoe US bank State Street, which employs over 2,000 people in this country, fuming. But did the pugnacious NTMA boss overdo the indignation after discovering that his organisation had been over-charged by €3.2m?

To those of us who are used to the normal soporific tone of such occasions, last Thursday's appearance by Mr Corrigan before the Oireachtas Public Accounts Committee came as something of a surprise. In his evidence to the PAC, which was covered by parliamentary privilege, Mr Corrigan accused State Street's UK arm of "fraud" when it deducted €3.2m of unauthorised fees when it sold €4.7bn of shares on behalf of the Irish State ahead of last year's bank recapitalisation.

State Street, not surprisingly, takes a very different view of the transactions in question claiming that it had notified the NTMA as soon as it had become aware of the problem and refunded the money.

"We have determined that certain employees failed to comply with the high standards of conduct, communications and transparency that we expect. Those individuals are no longer with the company," it said in a statement.

What seems to have happened is that, following a complaint about the fees it was being charged from one of its clients in the UK, State Street conducted an investigation that also uncovered the over-charging of the NTMA. A number of other State Street clients, including the Sainsburys and Royal Mail pension funds, were also overcharged.

Given that the money was refunded and the guilty individuals have been punished why did Mr Corrigan feel the need to cut up so rough on State Street? There was an element of pour encourager les autres in his PAC performance. What service provider would now be tempted to short-change the NTMA following State Street's humiliation?

But did Mr Corrigan go too far in venting his anger? State Street employs more than 2,000 people here. How favourably will it look on Ireland the next time a major jobs project comes up for grabs after having had its nose so comprehensively rubbed in it last week?

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