Wednesday 11 December 2019

NAMA likely to break even, predicts top credit agency

Fitch says bailout estimate 'plausible'

Thomas Molloy

THE National Asset Management Agency (NAMA) will probably break even while the Government's latest estimate of the cost of the bank bailout is "plausible", one of the world's leading credit-rating agencies said yesterday.

Fitch Ratings said the Government's forecast was "particularly" plausible if the so-called stressed-case scenario is used.

That scenario, unveiled last week in a bid to give the public and investors a final price tag for the bank bailouts, puts the total cost of the cash injections at between €45bn and €50bn.

Yesterday's comments came as Fitch again downgraded Irish bonds.

And it warned it is more than likely it will do so again over the next two years because of the greater-than-expected cost of saving the banks and uncertainty about the timing of an economic recovery.

It was one of the first concrete responses to the Government's efforts to clear the air last week and reassure bondholders Ireland can manage both the cost of the bank bailouts while also taking steps to reduce the deficit which is set to hit a record this year.

Moody's had warned earlier this week it might downgrade our debt. A downgrade usually pushes up the cost of borrowing.

Fitch analyst Chris Pryce said it was "reasonable to assume that NAMA will over the long-term break even given the average 58pc discount that has been applied to transferred assets compared with an original forecast of around 30pc".

Finance Minister Brian Lenihan said in September last year that NAMA would make money over a seven- to 10-year period.

At the time, he was expecting NAMA to pay much more money to buy loans from the banks.


NAMA has since slashed the amounts it is prepared to shell out for bad loans to €31bn from the original projections of €54bn.

This means NAMA has spent far less than expected to cleanse the banks of the development loans extended to the country's biggest developers.

NAMA's reluctance to pay large amounts of money for fields, ghost estates and empty lots in our cities has boosted its chances of breaking even.

But, it means the banks got less money than many analysts and shareholders had originally predicted.

This was one of the main reasons why the cost of recapitalising the banks had been "much higher than anticipated", Fitch said.

Fitch cut Ireland's bonds to A+ with a negative outlook, which is the lowest notch among the three major rating agencies which follow Irish debt.

However, it remains several notches above Greece which is rated BBB-, or just one notch above junk.

The rating agency said the "timing and strength of the economic recovery is critical to firmly placing public finances on a sustainable path".

In a hint it was concerned about a possible change of government, the rating agency added "broad-based political support would help strengthen the credibility of the medium-term fiscal consolation effort".

This was seen by some as a warning the Government needs to garner broad support from other political parties if the four-year spending plans, due to be outlined in November, are to convince the markets.

Irish Independent

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