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YESTERDAY, THE NATIONAL Asset Management Agency (Nama) released its year-end review for 2020.
It gives a rough sketch of the so-called ‘bad bank’s’ performance throughout last year ahead of the release of Nama’s full annual report later in 2021.
And by all accounts, 2020 was a bumper year.
Nama says that it generated €900 million in cash in 2020 through asset disposals and management, “exceeding its target” in the process.
“Notwithstanding the difficulties brought about by Covid-19,” said Nama chairman Aidan Williams in a statement, “we redeemed the last of the remaining subordinated debt and our private equity obligations and were therefore in a position to complete the first payment of €2 billion from our lifetime surplus to the Exchequer.
“This significant payment was made at a critical time for the country and has materially reduced the level of Government borrowing required during the Covid crisis.”
Nama says it remains on track to deliver a lifetime surplus of €4 billion to the Irish exchequer.
What exactly does that mean?
The surplus
It’s long been signalled that by the end of its lifespan, Nama would return to the State a surplus on its activities, having made a profit each year since 2011.
Initially pegged at around €1 billion, we were in 2019 told that this projected surplus had been upwardly revised to €4 billion.
Some €2 billion of this surplus was returned in 2020.
Now, there’s no reason to believe that this €4 billion target won’t be reached — Nama expects to hand over another €1 billion for the State’s coffers this year, according to its latest forecasts, after another profitable year.
But the €4 billion figure itself deserves some scrutiny.
Moving targets
Nama was created by the Government in 2009 to alleviate the pressure on the Irish banks.
It did this by taking €74 billion of risky property loans off the hands of five Irish lenders — AIB, Bank of Ireland, EBS, Anglo Irish Bank and Irish Nationwide.
For this package of toxic loans worth €74 billion, Nama, backed by the State, paid €32 billion, representing a 57% discount: a reflection of the parlous situation in the Irish property market the time.
The remaining €42 billion (ie what the banks lost on the discount) was written off.
At the time, you may recall Nama’s then-chairman Frank Daly saying that it would pursue developers “to the ends of the Earth” to recover the full amount.
What happened then?
Well, at some point in the intervening period, the goalposts shifted.
Instead of seeking to recover the full €74 billion, it was decided that Nama would target the €32 billion the State paid for the bad loans.
It completed this task last March, as Nama’s year-end review highlights.
Through its activities — mainly offloading property assets to vulture funds and developers over its lifetime — Nama aims to return a €4 billion surplus on this €32 billion figure.
So really, as has been highlighted by TDs like Social Democrats co-leader Catherine Murphy in the Dáil last year, “the public took a hit” on Nama of around €38 billion.
Some economists would say that instead of a €4 billion surplus, Nama lost €38 billion.
‘Gone’
For its part, Nama says that there was no real chance of recovering the full amount, despite property markets regaining most if not all of their pre-crash momentum in recent years.
Pressed on this by Sean O’Rourke on RTÉ Radio 1 in 2017, former Nama chairman Daly argued that this money “was gone before Nama was ever set up.”
You can look at that and say ‘why did that happen?’ That happened because of bad lending, bad borrowing, but it was there and disappeared before Nama was set up.
Against this backdrop, Nama and its activities have faced plenty of scrutiny from policymakers.
Just last month, the Dáil Public Accounts Committee took Nama to task in a report into the sale of ‘Project Nantes’ — a batch of property-linked loans related to businessman Derek Quinlan’s boom-era property empire.
Following a report by Comptroller and Auditor General Seamus McCarthy, the PAC concluded that the 2012 sale of Project Nantes “resulted in a potential loss to the taxpayer of approximately €29 million”.
Nama executives are expected to field further questions from the committee over this deal in the coming months.
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38 billion loss being politically positioned as a 4 billion gain. I wonder how many of those developers who got bailed out and had debts written off subsequently re-bought parts of their property empires back from nama at a huge discount. I’m sure some were even employed by nama or contracted by them so sort their mess. A lot to come out on this yet.
@Spbeak: I agree 100% with your comment. But this happens in other countries and in other eras too. When Trump got into serious financial trouble through the late 80′s and 90′s and American banks were left holding bad debts of hundreds of millions, they paid Trump a few hundred thousand dollars a month as “living expenses”. The banks reasoned that the Trump ‘brand/public image’ was their best bet on recouping their losses, instead of treating the Trump business realistically. Once Trump’s failed Plaza Hotel investment was bought out by Asian investors, the banks strategy was somewhat vindicated and Trump of course claimed it as a success. I’m not just basking Trump again. I’m just saying that this is an international solution to these kinds of banking/financial crisis.
@David A. Murray: [typo] ….not just bashing Trump again…..
@David A. Murray: it doesn’t matter that it happens in other countries as well. It should not be happening here… In my country.
@David A. Murray: for us it’s not important that it happen in other countries as well.
@Spbeak: Happy to be corrected If wrong, but says state paid 32bn and recouped 36bn, banks not the taxpayer lost the 38bn. Think if inflation over 12 years taken into account can’t say it’s a 4bn profit, but it’s not a loss and it seems incorrect to see it’s a 36bn loss as you suggest ad we/gov did not pay a penny of that 38bn written off
It’s just another gravy train for the “connected”. They have more dodgy deals than good news stories.
@David Corrigan: Richard Bruton excoriated Brian Lenihan in the Dail in September 2009 for setting up NAMA. Bruton predicted that NAMA would be a failure, would never make a penny for the taxpayer and that the State was not capable of running a recovery bank. It turns out that it has made at least €4 billion so far in profit. The financial crash and ending of the Tiger in 2008 is still a very sore point for most people but at least NAMA worked out for the benefit of taxpayers.
@Ciaran O’Mara: €4 Billion in profit if you dismiss the €42 Billion write off, but hey let’s just focus on the positives
@Ciaran O’Mara: I think you should reread the part where we really lost 36 billion
@Michael McGrath: Of course, we lost oceans of money but that was before NAMA was set up. The critics like Bruton said that NAMA would lose even more and it didn’t. It made money.€4 billion. I would rather have that now that now have it.
@Ciaran O’Mara: than not have it.
@Ciaran O’Mara: if the govt bought property for 100bn then sold it to you for 60bn (well under the market price) .. then you sell it for 64bn and return your 4bn to the govt….they have made a loss not a profit.
@Ciaran O’Mara: except it didn’t make 4 billion profit. You’re taking Frank Daly’s word that it was gone before Nama, it wasn’t. Nama got €74 billion of assets for €32 billion. All it did was sell on at 10% profit at the vastly reduced price. As properties have come back strong (see other articles today) they could (if well managed) got more if not all back but the fact is they made a tiny profit on a seriously undervalued portfolio.
@Ciaran O’Mara: If it didn’t cover the entire cost of the loans, then it did not make a profit.
Shure aren’t they great, workng their little cotton socks off for us, no wonder they feel entitled to spend €230 k re decorating two boardrooms
NAMA was the biggest theft on the Irish people since the British took food during the famine!
And plenty of there friends and family made millions at the expense of the taxpayers!
The EU are to blame they put a gun to our head and told us to do it!
This won’t be forgotten!
I expect that, somewhere along the way, money that should be paid back to the taxpayer, will be used by the dept of finance to buy back vulture fund owned properties.
@Barry: not with FFG in governemnt
Battersea power station need i say anymore.
At the height of the crash (when NAMA took on the debt) houses on my road sold for €120,000. The same house now is €300,000. Going by my non economic logic, If NAMA took on the loans at 36 bil, stayed in bed or went drinking in the park until today, they would sell now for 90 bil giving a profit of 54 bil not 4…..I smell a rat!
NAMA appears as if it will exceed its profit objectives, having had the great head-start of acquiring Loans off the broken banks at a 50% + discount to original book value, following crash. Great news, at first glance! But on a deeper dive into the numbers…
…Had the focus been on Assets (Properties secured ) from the outset, as opposed to the Loans, NAMA’s Profits would be through the roof, and Frank could have avoided making that long unnecessary journey chasing shadows!
Name on the tin should have changed many years ago to NLMA, following change of policy direction.
So irish taxpayers paid 32bn and will end up with 36bn in returns. Banks lost 42bn on original transfer…. am I missing how this is a bad news story?
On my road at the height of the crash a house cost €120,000. The same house is now €300,000. If NAMA took on the loan for 36 billion at that time (which they did) stayed in bed or went drinking in the park they would sell today at €90 billion giving a profit of €54 billion not 4….anyone smell anything?
Love NAMA, NAMA jobs matter.
The €42bn head start helped
(pic) The grin of 3 Cheshire Cats that got the cream.
They recently spent €22k on a table and €1400 each on 26 chairs.
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