Report finds Nama generated 'reasonable return' for State as agency nears end

Chief executive of Nama Brendan McDonagh said the research shows that the agency was a “workable and effective resolution to the problems created by the poor banking lending practices of the Celtic Tiger era.”

The National Asset Management Agency (Nama) was “broadly successful” in how it managed selling of assets acquired following the financial crisis providing a “reasonable return” to the State over the 15 years it was in operation, a new report has found.

Established at the end of 2009, Nama is due to be wound down at the end of this year with its remaining responsibilities being transferred to other agencies. The board of Nama is projecting the agency’s lifetime contribution to the Exchequer will be €5.5bn, which includes its lifetime surplus of €5.05bn and corporation tax payments of about €450m.

The report, written by economist John Fitzgerald, analysed how Nama operated in acquiring assets from the five participating institutions — Anglo Irish Bank, AIB, Bank of Ireland, Irish Nationwide Building Society and EBS — as its efforts to maximise the value recovered for the State.

Mr Fitzgerald determined having purchased the distressed assets, “Nama’s strategy for managing, developing and disposing of these assets was broadly successful”.

“While the disposal of the assets took somewhat longer than originally anticipated, the revised time scale allowed Nama to maximise the full benefit for the State of the assets, helping offset some of the costs of the financial crisis,” the report said.

The report called Nama a “crucial component” of a wide range of measures introduced by the State to resolve the financial crisis. “The speedy implementation of the necessary difficult measures, including the establishment of Nama, contributed to an early resolution of the financial crisis,” it said.

It also noted that the Government came under heavy pressure from the Troika in the early years of Nama to sell off assets faster, but in resisting this pressure Nama was able to take the time to realise the full value of the assets it held.

“The rapid recovery in the Irish economy from 2013 played a vital role in allowing Nama to obtain what it had judged the long-term value of the assets it acquired,” it said.

It said the original valuation of the distressed assets Nama acquired following its establishment “was reasonable” in terms of their long-term valuation.

He noted that if the valuation of the distressed assets had been higher than the price Nama paid, it would have shown the capital injection by the State into the banks to be “unnecessarily large” and the bailout “possibly unnecessary”.

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“On the other hand, if Nama had overvalued the distressed assets it acquired, it would have made a significant loss on disposing of the assets.” 

The report said the €5.5bn return on Nama is “appropriate on a risk return basis” as even marginal additional adverse shocks to the economy over that period could have “wiped out that profit”.

“While the profit of €5.5 billion actually realised is significant, it has taken 15 years to accumulate, and it is consistent with Nama’s original valuation of the assets. Nama has earned a return of around 12.9% per annum. It represents a reasonable return on the original investment in Nama, with all the risks that that entailed,” the report said.

The fact that it has realised a significant profit at the end of its 15-year life indicates that it has been broadly successful in how it has managed the process of selling off its assets.

The report noted that Nama is viewed as a “success story” by studies comparing its performance with similar agencies in other countries.

Chief executive of Nama Brendan McDonagh said the research shows that the agency was a “workable and effective resolution to the problems created by the poor banking lending practices of the Celtic Tiger era.”