Tuesday 28 February 2017

Nama 'to generate €2.3bn surplus and pay off bulk of debt next year'

Donal O'Donovan

Donal O'Donovan

Financial results showed profits at Nama increased to €647m in the first half of the year, from €473m a year ago
Financial results showed profits at Nama increased to €647m in the first half of the year, from €473m a year ago

NAMA expects to have repaid the bulk of its senior debt by the end of next year and to eventually generate a surplus of up to €2.3bn.

Financial results showed profits at Nama increased to €647m in the first half of the year, from €473m a year ago.

The State's bad bank, set up to manage €72bn of property loans, said it expects to have largely paid off its debts by the end of next year. Results for the first half of the year include impairment releases - or write backs - of €247m, around four times higher than in the same period of 2015.

The latest results do not take into account any knock-on for asset valuations of the Brexit vote, which will be looked at for year-end. However, Nama has sold the bulk of its stock of UK loans, including the huge book of loans sold to US fund Cerberus.

The results show the contingent liability that would fall to taxpayers if its debts could not paid be met by Nama has fallen from €30.2bn when the agency was set up to €3.6bn. That debt, owed to the banks for taking over their loans, will largely be cleared at the end of next year, Nama said. A smaller €1.8bn subordinated debt, that taxpayers are not on the hook for, will be repaid by 2020 in line with the timescale set when the agency was set up, it said.

Working out and selling off commercial property loans to repay its set-up costs remains Nama's main focus, although it has been charged with delivering housing and commercial property. The agency is expected to put its €1.5bn Tolka portfolio, including prime Dublin 4 offices, on the market imminently.

Meanwhile, end-of-October Exchequer Returns published by the Finance Department last night showed the tax take came in ahead of forecast in the month, led by corporation taxes.

The October data showed the total tax take was €129m ahead of the €3.166bn target.

October is not regarded as an important month in terms of the overall budget arithmetic, as it is not a significant month for VAT or corporation tax payments, for example.

However, the continued positive results will be welcomed by policymakers.

"There will be relief in Government circles that the first post-Budget set of Exchequer figures are broadly on target," said Peter Vale, a tax partner at Grant Thornton.

Strong

"Similar to last year, the key feature of October's figures is another strong showing on the corporation tax front. It now appears more likely that the corporation tax increase witnessed this year is a sustainable one and may act as a quasi-buffer should Brexit impact on VAT and payroll taxes next year."

Changes such as personal tax cuts announced in the Budget have not had any bearing on the figures, and largely start in 2017.

In a statement, the Finance Department said that hitting and beating tax targets means spending commitments can be met.

"The tax performance has been solid through the first 10 months of the year, with tax revenues up 1.7pc on profile and up 4.7pc in year-on-year terms. In relation to the revised tax revenue forecast of €48.1bn, we are still on track to achieve this target. However, it will require all tax-heads to perform strongly in the last two months," the department said.

Irish Independent

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