Shares in AIB and BoI rise over investor faith in NAMA
Related Articles
Shares in the country's two top banks advanced yesterday as investors concluded that there were no nasty shocks in the draft legislation paving the way for the National Asset Management Agency.
However, analysts said that trading in Allied Irish Banks and Bank of Ireland is likely to remain volatile ahead of the Government revealing on September 16 the estimated writedowns that the sector will have to take on the NAMA-bound loans.
NAMA will be paying the banks for the loans in government-backed securities, bearing a coupon, or interest rate, based on the six-month rate at which banks lend to each other. This currently stands at about 1.25pc. Some analysts indicated yesterday that they will have to lower their forecast for the banks, as they had expected the banks to receive a higher coupon rate.
It is envisaged that NAMA will outsource the day-to-day administration of the €80bn-€90bn of loans it is taking, over to the original lenders.
The draft bill said NAMA may pay the banks a servicing fee for this. It is understood that a flat fee towards loan recovery costs will apply. This equates to €9m a year on €90bn of assets.
However, the legislation also provides for performance fees and profit-sharing fees, on terms approved by the minister. Government sources said that the details around this part of the bill have been left vague to invite outside suggestions before it goes before the Oireachtas.
The Government plans that if NAMA makes a loss over its 10- to-15-year expected lifespan, this will be borne by the banks through an industry-wide charge. This is not referred to in the legislation, but will be dealt with in a future Finance Bill.
Tax relief
Finance Minister Brian Lenihan previously said that the banks would not be able to claim tax relief on losses suffered as a result of the asset writedowns. However, the legislation does not rule out such relief. A final decision is expected before the bill is put before lawmakers in mid-September.
It could be legally difficult to prevent NAMA-linked banks using a procedure which is available to other banks outside the scheme.
Shares in Bank of Ireland jumped 9.2pc to €2.00, while Allied Irish Banks added 2pc to €1.75. AIB had come off its highs late in the session after it emerged that companies controlled by developer Liam Carroll, to which the bank is a leading creditor, were refused protection from their creditors.
However, Mr Justice Peter Kelly agreed "with misgivings", to postpone his refusal to continue protection pending an appeal to the Supreme Court on Tuesday.
- Joe Brennan
