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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

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.

Why is NAMA calming that it was not a public authority?

EU Commissioner’s preliminary decision on NAMA
Who is controlling NAMA?
Why is NAMA calming that it was not a public authority?
Is it in order to be able to escape having to supply information on its activities to the public via Freedom of information act?
see what the EU Commissioner’s preliminary decision is 35189551-NAMA-Preliminary-Decision-Reply
to recap this is what NAMA is suposed to be according to the finance Minster
10. NAMA is established as a separate corporate body with a board appointed by the
Minister for Finance under the control of the NTMA. NAMA as a corporate entity will
arrange and supervise the identification of property-backed loans on the books of the
qualifying financial institutions in the State but will delegate under its control the
purchase and management of those loans to a separately created special purpose
vehicle (the “SPV”)2. 95% of the consideration for the purchase of the loans will be
financed by securities guaranteed by the government and the remainder with non-
State guaranteed debt.

11. The SPV will be a separate legal entity with a subscribed capital of !100 million
with private investors owning 51% of the equity and the remainder owned by NAMA.
Given that the SPV is 95% funded by the State however, NAMA representatives on
the board of the SPV have a veto over all decisions of the SPV board that could
affect NAMA or the Government.

12. The SPV will seek to make a profit through the management of the acquired
assets during the lifetime of NAMA, however given that the SPV debt will be
guaranteed by the Government the distribution of the SPV profits to the private
shareholders will be capped and the remainder will accrue to the State.3 The details
of the distribution of the SPV profits are not publicly available.

Now who is in control of this SPC?
Why the investment arms of the three major Irish financial institutions (IL&P, BOI, AIB) thats who! The very vehicle that is there to rescue their own corrupt companies.link here

This is outrageous! Lenihian and his cronies has pulled a con on us all,
The same gangsters that have caused this whole financial collapse are now running NAMA.(The Bankrupt Banks ,have effectively taken control of 80 billion worth of assets for 100 million investment )the barging of the millennium
And it should come as no surprise to see the NAMA board try now to extract themselves from having to answer the hard questions from the probing general public through the Freedom of information act
When will the Irish people rise up and stop this fraud?

Central Bank report for Quarter 2

Just more lies?
Central Bank report for Quarter 2, NAMA’s resident and non-resident borrowers
namawinelake :
source http://namawinelake.wordpress.com/2010/07/31/central-bank-report-for-quarter-2-nama%e2%80%99s-resident-and-non-resident-borrowers/

The wide-ranging quarterly Central Bank report and forecast published yesterday contains some interesting nuggets on NAMA and Irish property in general. On NAMA, it publishes information on the first tranche which hasn’t been publicly seen before, namely a split of the first tranche loans between resident and non-resident borrowers and also gives the provision the banks held for the loans transferred. The information is on page 39 of the report and is summarised here.

Of note is that the writedown by NAMA on the loans (49.6% in total) comprises a writedown by the banks themselves (23.7%) and NAMA’s additional write-down (26.9%) – given that Anglo’s accounts were published on 31st March, 2010 and INBS’s accounts were published on 9th April, 2010 and they each contained the government’s recapitalisations announced on 30th March, 2010, it is indeed amazing that they were showing their provisions at such a low level – was it a case that the accounts were produced many months earlier and only amended for the government’s injections of capital – wasn’t there any attempt to show the imminent NAMA haircuts? As to the split between resident and non-resident, I’m not sure how much can be deduced. For information the following were reported by the media (not confirmed by NAMA and indeed Paddy McKillen’s spokeswoman has denied that Paddy was in tranche 1) as being the Top 10 developers in the first tranche – spot the non-residents!
Liam Carroll
Bernard McNamara
Sean Mulryan
Derek Quinlan
Paddy McKillen
Treasury Holdings
Michael O’Flynn
Joe O’Reilly
Gerry Gannon
Gerry Barrett
As to what the Central Bank say in their report on page 39 about the write-downs with respect to residents and non-residents they are talking rubbish – the figures show that the resident loans had greater write-downs at both the banks and at NAMA.

Kenny prancing around the K-Club

 

The significance of Ronald Quinlan’s revelation today that Fine Gael sought and accepted a sum of money from a property developer — and not just any property developer — should not be underestimated.
O’Flynn Construction is one of the country’s most- indebted construction firms. The taxpayer has recently financed the transfer to Nama of those debts, estimated at around €1bn.
Michael O’Flynn, the chairman and managing director of O’Flynn Construction, on Wednesday last swung his Mercedes S350 executive saloon into the K Club to play a round of golf with the man who regards himself to be the Taoiseach-in-waiting.
Mr O’Flynn sanctioned his firm’s payment of €1,500 for the honour of teeing off just behind the leader of Fine Gael, Enda Kenny, and his most loyal lieutenant, Phil Hogan
He also sanctioned the payment of an undisclosed sum, possibly another €1,500 — maybe more, maybe less — to sponsor the famous 18th hole at the K Club, a club which is itself partly owned by Gerry Gannon, also of Nama fame, who is one of the so-called Anglo Golden Circle.

And so on and on it goes, full story at source
http://www.independent.ie/national-news/fg-taps-nama-10-developer-for-money-2263297.html

Comment:

I am disappointed to hear that Fine Gael’s Enda Kenny (self styled Taoiseach in waiting) did not have better judgement and for my money (the little I still have left ) I will bet that he most certainly will not be the next Taoiseach.
Nor does he deserve to be! with such display of total disconnect from the general public!
Displaying this total detachment for the feelings of the ordinary people who are struggling to pay their continuously rising household bills and  green party new taxes
Enda Kenny has made a major miscalculation here; prancing around the K-Club the taxpayers of this country will not forgive this making out with the golden circle boys from Anglo Irish Bank !
The last thing this so called Taoiseach in waiting needed was to be photographed with members of the golden Anglo Irish circle
How can anybody now believe that this man or his party will make the developers pay their debts to Anglo Irish Bank, now owned by the hard pressed taxpayers of this country?
Mr. Kenny I predict you will not be the next Taoiseach of this country and you might not even be in the Dail after the next general election
What a shame too!
The perception now of the ordinary people of Ireland is that Fine Gael has little or no difference in policies with Fianna Fail, with regards to NAMA or the Developers who ripped off all those now and for the foreseeable future will wallow in negative equity.
Enda Kenny’s golf outing at the K-Club has only encouraged the belief he is just as chummy as Lenihan and Cowen with the brazen developers and bankers who have destroyed our country and have made us servants of the international bond pushers
What dimwit is advising this man?

I call upon the Fine Gael and Enda Kenny to send back the donations made by this Developer and to commit no to take any donations from any other Developers involved with NAMA

please singe petition on facebook here

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