Irish Life treasurer to take top role at NTMA

IRISH Life & Permanent’s group treasurer Michael Torpey is resigning to take on the job as head of banking with the National Treasury Management Agency (NTMA).

News of the top level appointment comes as the first transfers of bad loans to NAMA, which is part of the NTMA structure, draws nearer.

Speculation is mounting also about the level of discounts the banks face in a property market continuing to slump in value as the fall out from the property bubble continues to erode confidence in all aspects of the property market.

Some commercial investments have been slashed by 80% while house prices, down 50% from their peak, are set to fall another 10% this year.

Unconfirmed reports suggest the “haircuts” or discounts on the first lot of loans moving across from Bank of Ireland could be as high as 40%.

Broker estimates last week estimated the average discount on Bank of Ireland loans to be less than 27%.

The NAMA process has been fraught with difficulties as it pushes the virtually bankrupt banks to ensure the Irish taxpayer is not taken to the cleaners as opposition parties in the Dáil have warned.

It has been projected that the new bank will pay roughly €54 billion for the €80bn being transferred across.

And if the latest writedowns of up to 40% carry right across many of the loans being sent to NAMA the banks would be forced to raise more capital than previously expected.

Right now it is estimated that BoI needs to raise €2.2bn and AIB €4bn, while the state owned Anglo will require a further €6bn.

Negotiations are under way in Brussels on that issue, with the government and Anglo’s top bankers arguing the case for the additional €6bn in state backing for the bank.

Anglo received a €4bn capital injection last year to ensure its survival.

Opposition parties have described it as a “zombie bank” and argue it should be killed off.

Of greater concern is the threat by new Financial Regulator Matthew Elderfield to get the capital ratios of the two main banks up to 7% within a short time frame.

It was expected Tier 1 capital ratios would be increased to 8% by 2012.

If Elderfield, who has been talking tough, insists on a sharp correction on the funding levels of the banks then AIB in particular could find itself in a race against time. And despite a plan to sell off assets in Poland and the US, it may end up with the state holding more than 50% of the equity within months.

Ironically, BoI, thought to be the most vulnerable of the two banks, may escape the clutches of the state.

It will transfer a total of €12bn to the bad bank while it has to raise roughly €2.2bn in new capital to comply with the tougher banking regulations. Even if it suffers deeper discounts on the loans the view now is that it can remain independent of the state.

Next week, as the Government announces the recapitalisation plans and the level of the NAMA write-downs, BoI is due to announce its own revenue raising plans and the restructuring of its balance sheet.

Opposition parties say the banks are bankrupt and should be nationalised while they regard Anglo as a white elephant that will soak up at least €10bn of state funding. However, incoming chairman Alan Dukes insists the bank has a future.