NAMA slashes 72.4pc off poor quality Irish Nationwide loans
Building society takes largest haircut in second set of transfers
Published 20/07/2010 | 05:00
Irish Nationwide, the building society run by Michael Fingleton until he resigned as chief executive last April, has emerged as having the worst quality property loans, according to the latest discounts released by Nama.
The second transfer of loans to NAMA was completed yesterday and shows Irish Nationwide taking a 72.4pc discount, or 'haircut', on the book value of its loans. Most of the other NAMA banks had discounts below 50pc.
To date, €20.5bn of loans have been purchased by NAMA for a sum of €10.4bn, giving a discount of almost 51pc.
The second tranche had an average discount of 48pc, with the first tranche at 50pc.
Irish Nationwide, which has effectively been nationalised since March, had the highest discount in the first tranche as well at 58pc -- higher than even that of Anglo Irish Bank.
Anglo has not transferred its second batch of loans yet, due to the amount of paperwork involved in the process. A spokesman for NAMA said yesterday said there was no other reason for the delay.
This time around, the lowest discount was Bank of Ireland, which only suffered a 37.8pc haircut, with EBS coming in at 46.4pc and AIB at 48.5pc. AIB said 15 customers were covered by the €2.73bn of loans transferred in the second tranche, meaning that each customer had total loans of €182m each.
The third tranche of loans will be transferred over in late August/early September and is likely to contain loans taken out by large syndicates, many of them headed up by legal figures and estate agents.
The poor quality of Irish Nationwide loans is not a surprise to many in the industry as the building society provided loans with high loan-to-value ratios, meaning the developer clients only put in a small amount of funding themselves.
A large number of loans were also advanced to special purpose vehicles (SPVs), which can make it difficult for the building society to recover money from a client who defaults.
Irish Nationwide's ability to recover money from customers who have defaulted on loans is also hampered because the company did not get personal guarantees from customers, in the same way as Anglo.
These handicaps will now hit NAMA, which effectively becomes a debt collector to a large number of Irish Nationwide customers.
The building society is now under the control of Finance Minister Brian Lenihan, who holds a special investment share in the society, allowing him to overrule any decision of the board.