'Modest' 10pc growth is crucial break-even target
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LOANS bought by NAMA will have to appreciate by a "very modest" 10pc over the next decade for the 'bad bank' to break even, Finance Minister Brian Lenihan said last night.
If property asset values keep pace with the general consumer price inflation, which tracks simple products like the price of milk, NAMA will break even and turn a profit for taxpayers, the minister added.
Allowing for assets to appreciate by 10pc is a "very, very modest allowance", Mr Lenihan said at a press conference in Government Buildings last night to tease out the 'bad bank' plan.
While he accepted that having a "long-term economic value", which added another €7bn to the current market value of €47bn, may not be a popular way of undertaking NAMA, banks had to be incentivised to work out their bad loans. Otherwise, they could just play a "long-term game" while the economy is further damaged.
"What other reason would compel them to go into NAMA if they weren't getting something for their loan book? I think 10pc over 10 years is a very very modest allowance. You will find very few economists or valuers who dispute that figure," Mr Lenihan said.
"It really is a very low uplift. It is in consumer price index land. You are talking about the price of milk, the price of beer. We don't want another property boom."
A draft business plan has now been drawn up for the operation of NAMA and will be published before passing the second stage of the legislation.
That plan will contain specific details on how the 'bad bank' will work, and include details of how some 70 staff will be employed directly by NAMA to deal with the largest 150 borrowers.
Some institutions may require additional capital in order to absorb the losses arising from the transfer of their impaired assets to NAMA and in order to maintain appropriate levels of capital, but Mr Lenihan said that he would not be giving out any potential figures.
Injections
"If the banks are incapable of raising funds on the markets, the State has to make the necessary capital injections to support the capital positions of these institutions," he said.
The 30pc 'haircut' under NAMA means the State is not as exposed as it would be under the alternative plans favoured by Fine Gael and Labour, Mr Lenihan claimed.
Amid claims from Fine Gael that NAMA represents €34,000 for every family in the country, Mr Lenihan said: "It's not a debt, it's not a millstone around taxpayers' necks."
Instead, taxpayers are buying something which can make money, he said.
- ine Kerr Political Correspondent
