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Is it time to let AIB go?

Allied Irish Banks' crest

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Is it time to let AIB go?

namawinelake | November 2, 2010 at 11:51 am | Categories: Irish economy, NAMA | URL: http://wp.me/pNlCf-Kw

It sounds like the kind of decision a family around the death bed of a loved one faces. Though perhaps the comparison isn’t in the best taste, the reality is that the venerable 185-year old bank is facing insolvency and it is only the dogmatic government strategy of maintaining a duopoly of “Irish” banks not to mention over €10bn of public funds and significant ECB funds that is keeping the bank afloat. This entry examines the status of AIB and the cost of keeping it alive.

Firstly for our international friends, AIB is Allied Irish Banks PLC – note the plural “Banks”. It has nothing to do with the biggest failure in Irish corporate history, Anglo Irish Bank which is referred to domestically simply as “Anglo”. AIB was conceived in 1825 with the opening of a bank called Provincial Bank and over the next century and a half merged with other domestic banks to give us the Allied Irish Banks that we know today. Alongside Bank of Ireland it is seen as the rock of Irish banking.

During the property boom in the 2000s the bank was a late participant in the mania but there is evidence that once it arrived at the party it wasted no time in trying to catch up with the existing party-goers. The Minister for Finance estimates that the bank’s remaining NAMA loans are worth 40c in the euro (including long term economic value).

Its most recent set of accounts for the first six months of 2010 show that the bank had assets of €169bn, liabilities of €160bn and capital of €9bn. So it is a huge business in an Irish context but clearly solvent by reference to these results. Unfortunately the results don’t reflect the true condition of the loan assets. The cumulative provision for losses on NAMA loans in the interim results was 26% – that is, the loans were worth 74c in the euro. The most recent ministerial estimate is 40c in the euro. This should result in a further loss to AIB of €5.5bn. But NAMA loans form a small part of AIB’s total loanbook and the company will have some €81bn of non-NAMA loans (plus €4.5bn of €5-20m formerly NAMA loans) once NAMA has absorbed the poison. The cumulative provision on these loans in June 2010 was just €3bn (note 22 on page 83). Given that these loans include commercial property and business lending in a state which has suffered the greatest contraction in GDP amongst developed countries in modern times, I would suggest that provision is utter fantasy.

Like some shady cash-in-hand sole trader, AIB maintain a second set of books under the auspices of the Financial Regulator who in March this year set out the capital requirements for AIB and other banks (the Prudential Capital Assessment Review). In September using this second set of books, the Regulator announced that AIB needed raise €10.4bn by the end of this year. AIB’s strategy was to dispose of some assets and then to raise additional equity underwritten by the State. There is a detailed entry on these capital raising efforts here but in summary the bank disposed of its Polish operation (still subject to approvals) which yielded €2.5bn capital from the €3.1bn sale price and yesterday AIB held an EGM in which shareholders approved the sale of the bank’s stake in US bank M&T which should add €0.9bn to the capital coffers. The bank announced yesterday that it was placing the sale of the UK operation on hold (though there appears to be some back-pedalling on these comments this morning). Unless there is some dynamic between the UK sale and capital that means that the bank still needs €7bn in new capital in the next 60 days. And there is only sucker with that level of available funding that is willing to invest in what is likely to be an insolvent bank, and that’s the government who seem intent on placing just under one half of our National Pension Reserve Fund (that’s the €3.5bn invested in preference shares last year and the €7bn now needed as a proportion of the €24bn funds in the NPRF) in one basket (case) – AIB.

The government strategy seems chauvinistic (“we need a duopoly of Irish banks”), knee-jerked, immoral (not a word you’ll often see on here but taking money from the pension fund to prop up an insolvent bank is flagitious when there are other options to protect a functioning banking system), recklessly risky (one half of the pension fund is “invested” in one company in one sector). AIB should be taken into 100% state ownership immediately, the State should assess the value of any shareholdings in AIB (I expect they are worth nothing), negotiate with the €4bn+ of junior bondholders the company had at June 2010 and assess if senior bondholders might make a contribution to the insolvent bank. Only then should the State assess the systemic importance of AIB and should probably seek a buyer for the rump of that company. Even if the state is left with only one Irish bank so what? We have a Financial Regulator with 520 staff that should be able to regulate a restricted market to combat uncompetitive practices and when the Irish economy recovers other banks may see prospects here.

If on the other hand, we maintain the pretence that AIB is a viable bank then €7bn will need be found in the next 60 days. At the very best we are set to lose €1.8bn if we continue with the madness of the NPRF underwriting a share issue at €0.50 per share when the shares are presently trading at €0.35. With the healthiest Irish bank, Bank of Ireland, having to borrow 3-year funds at 5.875% last week (excluding costs) in a market where mortgages and commercial lending is still available at 3%, the prospects for profitability at AIB are slim in the context of the NPRF’s investment strategy which allows it invest in any market across the globe.

It is time to say our goodbyes and pull the plug.

source http://namawinelake.wordpress.com/2010/11/02/is-it-time-to-let-aib-go/

Comment:

Unfortunately this government is hell bent on holding on to this once trophy bank along with the top notch gangsters and X Politicians at the helm who will not vote themselves out of this sought after gig

Since the Minister of Finance himself says that the still remaindering loans are only worth 40c in the euro this alone tells me that the bank is gone beyond repair, as every one of his pronouncements on figures have been totally out.  I expect that you wouldn’t even get 10 cent on the euro The cost is irrelevant as the down trodden taxpayers are going to pay up.This Bank is dead and powering billions into it is tantamount to treason.

Shut this toxic toilet down now and save us the poor taxpayers a little bit of pain!

Thomas

Residents movement for political change

Is this NAMA’s first property for sale in the State?

74 acres opposite the K Club at Straffan, Kildare

Just over a week ago, the NAMA CEO disclosed at the Cantillon School of Economics in Tralee that NAMA was close to disposing of €500m of property. The comments, reported by RTE, were seized upon by many and I think it would be fair to say that in a country traumatised by a catastrophe where elites (it’s Ireland and its plural), golden circles, insiders, unverified trust between bankers/developers, political clientelism (and in extreme cases corruption), secrecy and a lack of transparency are all blamed, that the thought of NAMA disposing of such a large chunk of property aroused intense suspicion.

The day after his appearance at Cantillon the Irish Independent carried what seemed like words of clarification from the NAMA CEO and the Independent said “the agency is also preparing to sell off land worth around €500m as it tries to meet a target to dispose of a quarter of its portfolio by the end of 2013. The land will be sold by local auctioneers and those buying the land will not know that it is being sold by NAMA. The only signs that NAMA is active will be “realistic asking prices”, Mr McDonagh added.” The same day apparently a journalist at the Tribune said that the €500m disposal was of loans and not real property and there was speculation that the loans related to the Cosgrave brothers’ holding on Oxford Street, London or some part of the Maybourne group of hotels (Claridges, the Connaught and the Berkeley all in London).

And today NAMAwinelake has received a message purportedly identifying the first properties to be offered for sale by NAMA. To use journalistic terms the message is a single source and unverified. It alleged that three land holdings including one opposite the K Club in Kildare were now being sold by NAMA. Three months ago, the Irish Times carried a story in which they said that alleged-NAMA-Top-0 developer, Gerry Gannon, was selling his 49% share in the K Club. And that he was selling a 74 acre holding opposite the K Club reporting that it was likely to sell for €20-25,000 per acre. The selling agent was HT O’Meagher Reilly. At the time, the land didn’t appear on their website but it is there now. This morning, NAMAwinelake contacted HT O’Meagher Reilly and asked if NAMA was the seller of the parcel of land. A prompt response came back which ignored the question (I don’t mean to imply impoliteness, in fact the message received back was very polite indeed) of NAMA’s involvement but stated “the property has been on the market for the past 2 months and we are now hoping to bring the process to a conclusion with the top bidders within the next week .We have been guiding offers in excess of €17500 per acre.” The price shown here is considerably more than the reserve quoted in the unverified message received. With respect to the source of the message received, I obviously don’t know whether the source is connected with the sale and is trying to increase interest or whether the information is reliable, though my personal opinion is that it feels reliable.

The implication from the Independent’s story last week was that land would be disposed of by auction. However in Ireland the term real estate auctioneer is mostly interchangeable with estate agent, and what the Independent said was the land would be sold by “local auctioneers” which might not necessarily mean the land will be sold at auction.

NAMA has said that it will comply with the Code of Practice for the Governance of State Agencies (2009) which states “The disposal of assets of State bodies or the granting of access to property or infrastructure for commercial arrangements e.g. joint ventures with third parties, with an anticipated value at or above a threshold level of €150,000 should be by auction or competitive tendering process, other than in exceptional circumstances (such as a sale to a charitable body). The method used should be both transparent and likely to achieve a fair market-related price.” And it would seem that there is a “competitive tendering process” going on at HT O’Meagher Reilly. There have been suggestions that all NAMA disposals should be via public auction (ebay has been suggested) and whilst some property transactions will be very complex indeed this is a subject that will be returned to on here in the near future.

Meantime, whilst recognizing that the information above is to an extent unverified and could be an elaborate attempt to drum up interest in one property, HT O’Meagher Reilly are contactable on + 353 (0) 862554060. The alleged reserve price from the unverified source suggests the land could be available at what seems like a bargain price.

source http://namawinelake.wordpress.com/

“This is Captain Cowen we will not change course”

Captain Cowen, and first officer Brian lenihan
Continues to steer the course dead ahead for Anglo 2 and NAMA god knows what!
Despite being told that it will lead to total destruction, the boys are determent to stay the course
come what may.

There comes a time when you must admit your wrong!

The money merry-go-round that is Anglo- NAMA

Has NAMA received a bailout to cover almost €300m of interest payments due 7 days ago?

By http://namawinelake.wordpress.com/author/namawinelake/

It came as a surprise earlier this year that NAMA was given a €250m “recoupable advance” authorised by the Department of Finance. This was in addition to the €49m state investment in the NAMA special purpose vehicle and €51m of private investment in the same. When responding to Richard Bruton’s question in the Oireachtas which prompted the revelation of the €250m advance (though the next day it was confirmed in the May Exchequer Statement) Minister for Finance Brian Lenihan said “The second [payment to NAMA – the first being the €49m capital payment to the NAMA SPV] was an advance of €250 million, which must be repaid to the Central Fund by 31 October 2010, to provide the Agency with a liquidity buffer to meet working capital demands pending the establishment of its own funding programme”. So next month NAMA is expected to repay €250m.
Of course NAMA was required to pay on 1st September, 2010 the coupon on its NAMA bonds and a rough estimate is that it needed to pay €290m (see below). The €290m is probably an underestimate as it appears NAMA has been transferring tranches in, erm, mini-tranches and the dates shown are the dates when the total tranche has been declared transferred. Luckily for NAMA, the first coupon on the subordinated debt is only payable on 1st March 2011 – I say luckily because the subordinated debt has quite a nasty rate of interest at the 10-year government bond rate – that’s the one that’s at 6.1% today – plus 0.75% – if banks are getting 7% per annum on subordinated debt for 10 years then why not having the debt honoured at the end if NAMA makes a loss might not be such an issue?

Comment

These type of moneys are regularly transferred to NAMA and believe it or not Anglo Irish Bank as well
Is there anyone asking the questions why we are paying these huge sums out to an entity that has no idea what to do with the countless of boxes of documents coming from the Banks that are supposed to contain the relevant deeds and convaincing documents needed to show ownership of property and any outstanding charges on the properties concerned .
I am reliably informed that this documentation is no where near complete and the question has to be asked why are NAMA paying for property that has no proper documentation?
At this stage we the taxpayers may have an even bigger problem on our hands if we are taking control of property that has no proper convaincing, no proper or up to date deeds and that may in most cases have been compromised by having multiple charges already over the same properties
Of course the banks are delighted to be rid of such toxic assets.

Drip ,Drip Lies and more lies from Cowen and lenihan

Even by the standards of the global banking collapse, Anglo Irish Bank stands out. From a loan book of about 75 billion Euros when the government took over in 2009, Anglo Irish says that it has only about 12 billion Euros in loans that it classifies as performing. The bank is expected to transfer 36 billion Euros in troubled loans to the asset management agency — about half its existing loans.
source http://www.nytimes.com/2010/09/01/business/global/01anglo.html?pagewanted=2&_r=1&partner=rss&emc=rssSo the question is if you have at least 75 billion of loans and only 12 billion are “performing” that leaves 63 billion not “performing” so you have a loss of 63 billion
And that is just from the figures that have leaked out from Anglo Irish Bank and what about the other banks Allied Irish and Bank of Ireland add another 25 to 30 billion that is just the beginning because as the recession bites we will have mortgage defaults all over the place causing more drops in asset values, get my drift?
Lenihan and Cowen are lying and their cronies are spinning a web of deceit with every press statement they come out with.
something must be done and done fast, if we are to save what is left of our sovereignty

Where have all the performing loans gone?

Where have all the performing loans gone?
August 7, 2010 by namawinelake

The last two weeks have seen suggestions that perhaps as much as €8bn of largely performing loans that were NAMA-bound will no longer come within the agency’s control, which would be very bad news for NAMA’s finances.

First we found out that NAMA had agreed not to transfer Paddy McKillen’s loans pending the outcome of Paddy’s judicial review proceedings which are scheduled for October 2010, though with appeals, could take considerably longer. This week we learned Paddy’s Metrospa Limited has sold a property on Old Bond Street in London for GBP £18.2bn and also that another of Paddy’s companies Maybourne has been “inundated” with expressions of interest to provide finance that might redeem the €600m-odd Anglo and Bank of Ireland loans apparently outstanding to the group. Come October, Paddy mightn’t have any NAMA eligible loans. Paddy has assured us all his loans are performing. Paddy has an estimated €800m outstanding to Anglo alone and exposures with at least one other NAMA bank.
full articel http://www.namawinelake.wordpress.com

Comment:

We are slowly been subjected to a gradual change of what NAMA was supposed to be
With the siphoning off the entire choice bits (performing loans) and leaving the toxic stuff in NAMA for the taxpayers, don’t be surprised to hear calls from the Insiders for a new bank and guess who will have a major share holding of this New bank why our old corrupt pals in Allied Irish Bank, Irish Life and permanent and Bank of Ireland
This will conclude the socializing of all the toxic assets and the privatisation of the profitable assets
This is stealing on a massive scale and no one will do a thing about it
Or will they?
stop this wholesale fraud now.

Paddy Mc Killen and NAMA (2)

Is NAMA capitulating to to-paddy-mckillen

namawinelake | August 3, 2010 at 1:35 pm

source http://namawinelake.wordpress.com/2010/08/03/is-nama-capitulating-to-paddy-mckillen/

News today that Paddy McKillen has at last made the sale of that Bond Street property on which pesky Bank of Ireland had previously put the kibosh. The Irish Times had reported previously in relation to Paddy’s judicial review application: “Mr McKillen claims the loans are “fully performing” and their transfer will have “a seriously detrimental impact” on the value of the underlying properties. For example, he said he planned to sell an investment property on Old Bond Street in London for €18.2 million last May, but when he went to enter a contract on the deal he was told by Bank of Ireland that the sale had to be approved by Nama, even though the loan on the property had not yet been acquired by Nama.”

Well NAMA finally seems to have agreed the sale and Paddy has got his €18.2m which is being described as “exceptional”. The company that sold the freehold in the building on Bond Street was Metrospa Limited which is one of the 15 companies joined with Paddy in his application for a judicial review. And with news that the Maybourne group is close to securing finance from the US property company Westbrook Partners and one other unnamed property trust, one wonders whether there will be any NAMA-eligible loans by the time the application for the judicial review is finally heard.

So Paddy may well keep his assets away from NAMA. Certainly bad news for NAMA as they are increasingly depending on performing loans to avoid having to go cap in hand back to the Department of Finance for yet another handout. Being deprived of €800m-plus of Paddy’s performing loans will hurt.

Comment:
This is bad news for the Taxpayers as we will now end up with all the Toxic stuff and the developers will run away with the choice bits just like I expected they would.
NAMA is a Fraud and a con on the Irish taxpayers
Plain and simple it’s a bailout for the FF Backed developers and Bank fraudsters

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