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Archive for the ‘Anglo Irish Bank’ Category

Bank of Ireland and accounting gimmickry

Bank of Ireland announced that €2.1bn of formerly NAMA-bound loans would not be going to NAMA. Where are they going, if anywhere? Why are they not going to NAMA? Is this a further contraction in NAMA’s performing loan portfolio (BoI have had the best performing loans thus far evidenced by their top of class 36% average weighted haircuts on Tranches 1 and 2). It is interesting that the EU Decision on BoI’s future which was made in July 2010 has not yet been made public more than two months later. BoI emerged from yesterday’s statements as the only healthy NAMA Participating Institution in the sense that it doesn’t need additional capital. Has some jiggery pokery gone on with the €2.1bn of formerly NAMA-bound loans to enable BoI to meet its PCAR requirements?

Full article here http://namawinelake.wordpress.com/author/namawinelake/

Place you’r bets on Bank Of Ireland


A few months ago, I said that  Bank of Ireland share price would fall  to 55 cent  and even lower down to the 20’s . Any of my followers that took heed of my advice will now be nursing huge profits

Bank in April I warned that the rights issue was a complete rip off and the Government went ahead and purchased 575.6 million shares at €1.80 each. So at this mornings prices we the taxpayers have sustained loss again of 70 % = 402.92 million Euros in 5 months

In any other business these incompetent baboons Lenihan and Cowen  would be kicked out of office  ,Truly monkeys wouldn’t do any worse!

As for the distressed shareholders I afraid there is more bad news on the way .Bank of Ireland I believe ,Is harboring derivatives, and the news  cannot be  good . Anglo and Allied Irish Bank are also in the dog house and nothing will change the direction of the shares until the full facts are known and I don’t mean the banks telling us fibs we need to have an independent audit done on their derivatives trades of which I believe we are looking at 150billion at least in losses

In other words all the banks are insolvent and we are on course for a final showdown with the IMF having to step in and save the day

Shareholders get rid of the toilet paper you are holding.





Lenihan logic: heads you win and tails you win for the bondholders

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Irish Finance Minister Demonstrates that he doesn’t believe in Capitalism
By The Fundamental Analyst, on September 24th, 2010
Here again we see another case of those that embraced capitalism on the way up, shudder at the consequences when things go the other way. Take the latest comments from the Irish Finance Minister, from Reuters:
Irish finmin says no chance banks, govt will default
DUBLIN, Sept 22 (Reuters) – It is unthinkable that Ireland or its banks would default on senior debt, Finance Minister Brian Lenihan said on Wednesday.
Opposition politicians and some media commentators have called on Lenihan to force bondholders in Anglo Irish Bank [ANGIB.UL] to take some of the hit for the nationalised lender’s massive losses, which are a major burden on the exchequer.
“It’s unthinkable that Ireland would default on senior debt or that Ireland’s banks would default on senior debt,” Lenihan told Reuters in parliament.
“Ireland is not prepared to be some kind of social experiment for bank default.”
Why is it unthinkable? I’m not up to date with the extent of Anglo Irish Bank’s problems, but if the losses are big enough to eat through all subordinated debt then senior debt is next in line, simple. This is what happens in a restructuring, equity holders get taken out and bondholders take a haircut. Maybe the losses aren’t that big that senior bondholders need to take their lumps, but even so, to make a blanket statement such as the Irish FM has made demonstrates that he is firmly of the belief that bondholders aren’t responsible for their mistakes and that capitalism should be suspended when things go pear-shaped.
There you have it once again Lenihan is way out of touch with the norms of capitalism
Its all about risk that’s why bondholders get to demand such high interest payments because there taking a gamble and if things go pair shaped they go and take a bath
Lenihan has a logic of heads you win and tails you win for the bondholders and they love him for it!
Maybe it would be better if Lenihan was in charge,”lets shift Cowen “me thinks the bondholders might be thinking”!

Sorting out the financial crisis

A series of unconventional interviews . This week, Tony Soprano
namawinelake | September 19, 2010 at 6:02 am | Categories: NAMA | URL: http://wp.me/pNlCf-AM

This week sees the first of five weekly interviews in which aspects of Ireland’s financial crisis will be discussed with some unusual personalities with some unconventional thinking. This week we are joined by Tony Soprano, New Jersey businessman.
NAMAwinelake: So Tony, I understand that you have some experience of the debt business and we’re here today to talk about the enormous debt burden being faced by Ireland as it tries to restore a functioning banking system to the economy.
Tony Soprano: Right, but somehow I don’t think you’re gonna like what I have to say.
NWL: Well, let’s see. So you know the score. We’ve had a property boom. Banks loaned enormous sums to fund property projects. Property prices have crashed. Which means banks are in danger of going bust which would ruin the economy and the country. The government has borrowed huge sums to shore up the banks and the day to day running of the country and has guaranteed even bigger sums. And now we’re facing a decade or more of crippling austerity. Have you any ideas?
TS: Ever heard of a “bust out” scam? No, let me tell you about it.  Now to work this, you have to have a good credit history but you’re facing ruin and need to be desperate. Say you have a credit card with a €20,000 limit. During the month, you runs up debts right to that limit, you buy things that you can easily sell on – booze, cigarettes, iphones whatever. And then you get your credit card statement. What you do you is you go to the bank and pay in a €20,000 cheque. And here’s the clever bit. The credit card company credit your statement immediately when you pay in the cheque and you get your full €20,000 credit limit restored. However, it takes 3-4 days for your cheque to clear and of course it doesn’t, it bounces. But in those 3 days you spend another €20,000, again on merchandise you can sell on quickly. And you stash the cash. The credit card company comes after you and you declare bankruptcy.
NWL: Jeez! And credit card companies haven’t wised up to that?
TS: Maybe some have. But now let me explain how the bust out scam works in business. I used to have a friend from school, let’s call him John Konna. Now John was a hard working family man and he built up a chain of sporting goods shops, you know, sports kits, sneakers, bicycles, canoes, that sort of thing. The one thing about John was that he had a gambling problem. And he owed a gambling debt of €10,000 to a friend of ours. Now you know how it works, you have a debt, you pay it back with the vig.
NWL: What’s the vig?
TS: The vig? That’s short for vigorish. John owed our friend €10,000 and said he’d pay it back over 4 weeks. Each day €200 in vig was added to the debt. In addition if John missed a debt payment, that was added to the total. It’s tough but that’s how it works. Now John was having difficulty paying back the debt and it had gotten to €20,000. He came to me and begged me to join the “Executive Game”, poker for high rollers. I said to him “John, don’t do this, this game is not for you”. But he begged me, and then he begged me for a €50,000 loan. And what happened? He lost it all. And I wanted my money back. But John had all sorts of debts. So we worked the bust out scam on his stores. We ordered to the limit from his existing suppliers and sold the goods on, we opened up accounts with more suppliers, everything from flat screen TVs to computers and we maxed the credit and when the goods came in the front door we shipped them out the back door. All in, we took €500,000 of goods and sold them for €200,000. That’s when the credit stopped. John was ruined and never recovered. But we got our money.
NWL: But as you say, John was ruined, he was labelled a dead beat, he’d lost all trust and he’d never have a business again.
TS: Yeah but that was John, you’re talking about a country and you know sovereign debt it’s like diplomatic immunity. You remember that guy out of Lethal Weapon, you know the one who tells Mel Gibson that he can’t be shot because he has dip-lo-mat-ic imm-un-ity. Now of course in the movies, he gets shot anyway but this isn’t Hollywood, it’s real life and sure, for a period of time no-one will lend to you and if they do they’ll want extortionate interest. But hey, they can’t take your country, can they? And sooner or later they will start lending again. Maybe you get kicked out of the euro or even the EU. Maybe you move closer to Boston or Beijing or Bahrain.
NWL: But as to how this would work in Ireland. Take NAMA, they’re buying loans with €40bn or so of government-backed bonds. The banks can cash these bonds at the ECB. Now the loans that NAMA is acquiring have a value and if the government defaulted on its debt and NAMA refused to pay back the ECB, I could see the ECB trying to recover its debts from NAMA in the courts – after all NAMA is a company independent of government.
TS: True, but in the bust out scam you move the goods quickly so that the creditor can’t find them. So NAMA sells the loans or assets for whatever it can get for them. Say they buy the loans for €40bn and they sell them at a 25% discount for €30bn. And for good measure the banks cash the NAMA bonds immediately and lend them out to businesses. The bottom line is that your country gets an extra €30bn of cash that is not paid back. And that’s just NAMA. Consider your government bonds, consider the funding from the ECB to your zombie banks. Very quickly you could be talking about over €100bn of debt and that’s before running the bust out scam.
NWL: Well this is very entertaining stuff but it is never going to happen. You’re talking about default which happens very rarely but you’re also talking about a country defrauding its creditors. It just doesn’t happen.
TS: Ever heard of the “trolley problem”?
NWL: Don’t think so, no.
TS: My therapist told me about it. Comes from philosophy. A trolley on a railway line is running out of control. On the line ahead, there’s this one guy tied to the rails and he’s going to get run over and killed. You can flick a switch and the trolley will be diverted onto another rail but on this other rail, there’s two guys tied to the line and both of them will get killed. What do you do? Look, sure, in absolute terms it’s not right that anyone gets killed. But you have to weigh up the alternatives. There is pain ahead one way or the other and you have choices to make. And you might choose to runs up debts of 125% of your GDP and pay them back on the nail. But you might decide that the pain and sacrifice needed is too great and you default. Or maybe there’s something in between. You have choices.
NWL: Interesting but I can’t see the country defaulting and certainly can’t see the country deliberately running up maximum debts and defaulting.
TS: Maybe. Anyway, look it’s been nice talking to you. But I have to get on. I read in the press that these NAMA guys are saying that some developers will not survive. I need to give them a call and maybe offer my services.
Next week: A leading left-wing broadcaster warns of the dangers of Ireland being burdened with Weimar-scale levels of debt which he says will breed a new generation of satirical writers who’ll cast a shadow over Europe for decades to come with their Swiftean prose. Scary.

Irish banks are still in denial

While all the focus has been on losses at Anglo Irish, the other Irish banks are in denial about the scale of State support needed. It is time to face the facts: the three viable banks need over €17 billion, writes PETER MATHEWS 

LAST WEEK, the scary reports of liabilities at Irish banks centred on the colossal Anglo Irish Bank loan losses, the scale of which I (and other analysts) had been only too aware of more than a year ago. The focus on Anglo Irish was understandable, as far as it went. But the banking sector crisis is not just about Anglo. The Government is missing the bigger picture entirely.

The Irish banking system is analogous to a household’s heating/plumbing system with inter-related boilers. The two big boilers are AIB and Bank of Ireland. There are other smaller boilers, including Anglo and Irish Nationwide, which got really badly damaged by using the wrong fuel and, as a result, they’re now broken beyond repair. The correct decision now is to “stop-cock” Anglo and Irish Nationwide out of the overall system, decommission them and wind them down, in an orderly way, over a period of five to seven years.

AIB and Bank of Ireland (BoI) are the economy’s two heavy duty “main boilers”. Both are now in highly unreliable condition, hissing and spluttering and stopping and starting unpredictably. Both need major refits and servicing. They are severely undercapitalised and poorly directed and managed. Yet both persist in pretending they’re in reasonable shape. They are not. And that’s absolutely the case for BoI, notwithstanding the insistent protests that it is okay because it has more or less raised the capital amount indicated as adequate last March.

But that was last March. And last March’s estimates for both AIB and BoI were not enough. BoI needs €6.5 billion, not €3.65 billion. And AIB needs €10 billion, not €7.4 billion.

The proof goes along the following lines. Gross loans in AIB listed for transfer to the National Asset Management Agency (Nama) totalled €24 billion. A (light) 40 per cent writedown on this figure amounts to €9.6 billion, which should be rounded at €10 billion. We note also that AIB will have to absorb large further losses on its mortgage loan book, its corporate loan book and its SME book and also on its personal lending portfolio. In addition, it may well have uncovered exposures on derivatives. For these reasons, and extensive relevant professional experience, I feel conscience bound to point out that AIB definitely needs recapitalisation now of not less than €10 billion. Furthermore, AIB should not be selling its stakes in Polish and US banks. They are the most profitable, cash-flowing parts of AIB. AIB is only doing this as a panic measure to try and plug its deepening capital shortfall.

Similarly, BoI needs a €6.5 billion recapitalisation. Why €6.5 billion? Because in BoI, the listed loans for transfer to Nama were €16 billion. Apply a 40 per cent write down. This amounts to €6.4 billion, which should be rounded to €6.5 billion. All comments applicable to AIB in the preceding paragraph apply also to BoI.

The Educational Building Society (EBS) also needs recapitalisation of €1 billion to cover its loan losses. Four months ago, the Oireachtas Joint Committee on Finance and the Public Service was advised that the three viable banks, AIB, BoI and EBS, needed immediate capital of €10 billion, €6.5 billion and €1 billion. That’s €17.5 billion in total. The question arises: should the State provide all of this on top of the €7 billion already invested in AIB and BoI in 2009? Clearly not. How much of this €17.5 billion should the State invest? Perhaps €11 billion, in appropriate proportions, into AIB, BoI and EBS.

All of this will result in temporary State nationalisation of these three banks. This leads to another question: where will the €6.5 billion balance come from? The State will be in majority control, at levels in excess of 85 per cent, and able to force existing bondholders in AIB, BoI and EBS to take writedowns on their holdings of bonds, while maybe offering them, say, a small debt-for-equity swap as a sweetener to soften the blow. After, say, five years, the banks will have regained reasonable annual-maintainable normal profit levels in the range €3.5 billion to €4 billion, putting the State in a good position to realise, by way of stock exchange or private sales, its investment of €18 billion in these three banks, plus a profit.

Temporary nationalisation of AIB and BoI will merely formalise the reality that, without 100 per cent State support, both are insolvent. Removal of the State guarantee on deposits at this point would lead to a run on the banks’ deposits. However, we see the banks continuing their delusory charade that they are financially sound and independent!

Realism and optimism are essential for recovery. But optimism must be based on reality. As a country we’re facing a stark reality. Protracted denial in the banking industry, the Government, official Ireland and the professions must stop. Unfortunately, the Fianna Fáil-led Government is responsible for the financial destruction of our economy. Regrettably, the Green Party has collaborated in this destruction. These are the facts. The true situation has been denied by the Government for far too long.

Finally, after two years, only in the last few days have the Minister for Finance, the Government and (some of) the banks been forced to admit the true scale of the destruction. What a waste. What a shame.

So let’s stop the stupid denial. Let’s acknowledge the scale of destruction in the Irish-owned banking sector, not just the Anglo Irish story. AIB and BoI have not been honest with us. Their loan losses are also a shock-and-awe story and they’re only being revealed, on the drip, in drawn-out chapters.

Let’s measure truthfully all the appalling financial damage. Let’s insist AIB and BoI are recapitalised at the truthful, honest, correct and much more robust levels (thereby resulting in temporary nationalisation and bondholder participation through bond writedowns) to enable them to make necessary, much larger, loan-loss provisions than they’ve done to date. Let’s reverse the nonsensical, unwieldy Nama project. This can be done speedily and simply. We’ve got to stop what has become a slow-motion Nama/banks bailout nightmare. Let’s roll up our sleeves and face the challenge. And let’s get on with the work of recovery

source http://www.irishtimes.com/newspaper/opinion/2010/0909/1224278513715.html?via=mr


This is an excelent articel by PETER MATHEWS 

Early August I posted  my disbelief at the figures the EU stress test results for Allied Irish and Bank of Ireland at the time I stated I thought the figures from the EU were false and were conveniently forgetting some serious hidden derivative losses these corrupt institutions’ were keeping off the book through some fancy  account gimmickry  

My figures were for allied Irish were 10 billion and bank of Ireland, I thought 7 billion or there about .So it is nice to see an independent analyst confirm these figures

Comming over the wires I see headlines say

“Ireland has fallen four places to 29th on the list of global competitiveness and its banking system is the least sound of the 139 countries surveyed, according to the World Economic Forum’s annual rankings.”

now what does that tell you ?

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