Concerns raised over NAMA’s ability to manage loan book

DOUBTS have been raised about NAMA’s ability to manage its portfolio of loans and its interaction with banks.

This follows the revelation that NAMA believes more loans than previously thought are non-performing.

Professor of Economics at University College Dublin, Karl Whelan, said that it “disturbing” that every time the Government and NAMA have informed the public about the quality of the loan portfolio they are acquiring they have been optimistic.

“There’s a clear pattern here that the quality of the loan portfolio is turning out to be worse than original estimates,” he said.

He said there’s also concern about NAMA’s own ability to manage its portfolio and understand the portfolio that it’s going to manage. “There are very serious questions raised here about the interaction between NAMA and the banks,” he said.

“Whether somebody is paying you back, it’s pretty simple. They’re either paying you back or they’re not paying you back. I do not believe that the banks thought half these guys were paying back and now they found that a quarter are paying back,” he said.

NAMA said it expects about 25% of the €81 billion in loans will be income-producing, down from a previous 40% projection. It also said it may apply a discount of 50% on all the loans, matching the haircut applied on the first block of loans transferred.

The agency also said it may lose as much as €800 million over its lifetime under a “stressed” scenario outlined in the business plan on Tuesday.

The agency’s “central” projection is for profit of €1bn, down from a €5.5bn estimate made in a draft plan published in October.

NAMA chief executive Brendan McDonagh said that banks were “in denial about the quality of their loan book”.

“They didn’t want to admit things were as bad as they were,” he said.

Former Bank of Ireland chief executive Mike Soden said he does not believe senior bankers are lying so they must be incompetent.

“I know it’s very hard to be critical during these difficult times but I personally don’t believe that the senior bankers are lying,” he said.

He added they have been in a state of continual denial since the crisis began and every time they made a forecast they have undershot whatever the target is.

Yesterday NCB economists said the injections into Anglo Irish Bank that are “far more important” for Irish debt than the unknowable future of NAMA.

To date the Government has injected €14.3bn into Anglo, which is equal to about 9% of 2010 GDP.

“The real issue for Irish Government debt is now not NAMA,” they said.

Goodbody analyst Ken Darmody said it is early days for NAMA and the final outcome will take many years to be known, however, he added that it seems the financial institutions will be on the hook for any shortfall.


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