Wednesday 17 January 2018

NAMA won't recoup full amount owed for land loans

Credit Suisse analyst issues warning as EU Commission approves transfer of first tranche

Thomas Molloy

THE National Asset Management Agency (NAMA) is unlikely to ever get back the full amount it is owed for land loans bought from the country's banks, Credit Suisse warned yesterday.

"There is simply too much development and too much unoccupied property for even more new property to generate yields," said Credit Suisse analyst Niall O'Connor in a note to clients yesterday.

"For the development loans -- defined as land and land with construction less than 30pc complete-- it is hard for us to see how even a protracted period of restructuring would allow repayment," he added.

NCB Stockbrokers said last month that around 70pc of the loans transferred to NAMA will likely be development loans, while the remaining 30pc is likely to be investment loans to purchase existing assets. Investment loans are regarded as less risky than development ones.


Finance Minister Brian Lenihan told the public last December that NAMA would make a profit for the State over the next 10 years as it sold land for more than it originally paid. The organisation has not yet sold any land and is still valuing land as it buys smaller loans from lenders.

Officials have already conceded that some land NAMA has bought is virtually worthless and the agency may have to bulldoze some half-finished buildings so development land can be used by farmers to graze cattle.

NCB economist Brian Devine said last month that if NAMA were to lose half the money it has paid for the bank loans, it would add 10pc to Ireland's debt burden, as a percentage of GDP, in nine years' time -- assuming an average of 2pc annual economic growth.

Meanwhile, in Brussels yesterday, European Commission officials finally gave the thumbs up to the transfer of the first tranche of assets moved into NAMA back in April.

Half of those related to investment loans. The commission said yesterday that the transfer met transparency and disclosure requirements and the valuations were in line with its guidelines.

"The transfer satisfies predefined transparency and disclosure requirements" the commission said. It also "represents an appropriate means of remedying a serious disturbance in the Irish economy".

About €16bn worth of loans was moved from Allied Irish Banks, Anglo Irish Bank, Bank of Ireland, the EBS and Irish Nationwide at an average 47pc discount in the round of transfers.

Irish Independent

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