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NAMA Reports Profit of €247 Million After Tax For 2011

Operating profits of €100m per month/
€1.28bn in full year 2011
County-by-county breakdown of
property assets held as security for
loans published
€9.2bn asset sales approved to dateCash inflows of over €8.4bn in 27
months
€1.3bn in credit advances approved11,000 credit decisions taken,
average turnaround time 5.2 days
 

25 July 2012 – The National Asset Management Agency (NAMA) has today published its second Annual Report. The report – which details the Agency’s performance during 2011 – reveals that it made a profit of €247 million after tax in 2011 (2010: loss of €1.18 billion). 

The Agency made an operating profit, before loan impairment charges, of €1.28 billion in 2011 (2010: €305 million before loan impairments). 

Speaking today, Brendan McDonagh, Chief Executive of the Agency, said: 

“2011 was a year of great progress for NAMA. The Agency made a profit for the taxpayer. We successfully completed the first phase of our operations – acquiring loans from participating institutions – and our focus now is on generating the best possible return from these loans. We have also completed the review of all Debtor Business Plans. Cashflow generation is vitally important for NAMA and remains very strong. The task before us is significant but I am optimistic that NAMA will succeed in doing the job set out for it by the Oireachtas.” 

 

Financial statements – key figures:

figures rounded to the nearest million
Profit/(loss) for the year247(1,180)
2011
€m
2010
€m
Interest and fee income1,283525
Interest expense(512)(179)
Net interest income771346
Other income/(expenses) – mainly profit on disposal of loans/surplus income574(17)
Total operating income1,345329
Operating profit before impairment1,278305
Impairment charges(1,267)(1,485)
Profit/(loss) before income tax11(1,180)
Tax credit2350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Report 2011 – highlights

  • Net profit after tax and impairment of €247 million;
  • Acquisition of a further €2.8 billion worth of loans, bringing the total of acquired bank assets to €74 billion;
  • The Agency had generated cash inflows of €8.4 billion by mid July 2012;
  • Approved asset sales totalling €9.2 billion, with total sales completed of €5 billion by end May 2012 and with a further €2 billion in the pipeline;
  • €1.3 billion in new development funding already approved, of which €586 million relates to projects in Ireland;
  • 11,000 credit decisions processed by end May 2012; average turnaround time now stands at 5.2 days, down from 6.1 days at end 2011;
  • Supporting approximately 10,000 jobs in small and medium businesses in Ireland linked to NAMA loans;
  • Contribution to social and economic policy including identification of over 3,000 residential units for social housing provision, significant progress in remediating unfinished housing developments, and approval for over 170 rent reductions to support Irish businesses.
  • Plans to invest €2 billion in projects in Ireland to 2016 and provide an additional €2 billion in vendor finance for the commercial property market; both measures are expected to generate a substantial number of jobs;
  • Specialist Asset Management division set up to enhance the value of assets and complement ongoing work of the Asset Recovery division;
  • New initiatives to support sustainable recovery in Ireland’s property markets, including Vendor Financing and the 80:20 Deferred Payment Initiative; 

Strategic review update

Earlier this year the NAMA Board completed a strategic review to ensure that the Agency remains positioned  to meet its targets over the medium and long term. The approved strategy, which clearly indicates the Board’s priorities, falls into two broad categories:

  • Intensifying asset management activity: Working with debtors, receivers and potential joint venture partners on identifying and developing assets to create and add value to these assets and enhancing cashflow from 2013 onward. The recently announced €2 billion development funding for Ireland will be a key building block in this strategy. 
  • Generating activity in the commercial and residential markets: This includes a phased and orderly programme for selling assets and loans, with specific strategies for the Irish, UK and other portfolios. It will  include initiatives such as vendor finance, the 80:20 Deferred Payment Initiative for residential property, the establishment of at least one Qualifying Investor Fund (QIF) during 2012 and supporting consideration of real estate investment trusts (REITs) in Ireland.  

Both strategies are well advanced.

Speaking today on Board priorities, NAMA Chairman Frank Daly said:

“After two and a half years of solid work NAMA is well positioned to continue delivering for the taxpayer as we move into a phase of our operations where the focus will increasingly be on asset management and enhancement. With this in mind we have reconfigured the Agency to maximise its capacity to operate in what is a very competitive and fluid economic environment in Ireland and abroad.  

The Agency’s approach will be innovative and flexible. We will explore every existing opportunity and create new opportunities, with debtors and investors, to monetise our loan book and support transactions, and jobs, in the Irish market. We will build on the positive property taxation initiatives announced by the Minister for Finance in Budget 2012 and we are confident that our initiatives to provide at least €2 billion in development funding for Ireland and a further €2 billion in vendor financing will yield dividends for NAMA and for the country. Important as economic and financial outcomes are, it is not enough for us to concentrate totally on these. NAMA is also committed to supporting initiatives for the common good and in today’s report we highlight examples in areas such as social housing, making properties available for sports and community groups, unfinished estates and rent abatements where, although the “bottom line” is important, it is not the only consideration.

 If there is one overriding message I would give as we launch this Report, it is my absolute belief that the objective of everybody in NAMA is to get the best possible outcome for the taxpayer. This objective permeates every single decision we make. I appreciate that at times some of our decisions will not find favour with everybody or will perhaps be misinterpreted. That’s understandable – but let me reiterate – every single decision we take is with a view to the benefit of the taxpayer and nobody else.”  

New information on the location of property assets published

The Agency has published a detailed breakdown of the location of the property assets securing its loans, including a county-by-county breakdown within Ireland. 

  • The breakdown reveals that 90% of the Agency’s €17.5 billion Irish property portfolio is located in or close to counties with large urban centres (greater Dublin area and counties Cork, Limerick and Galway).
  • The Irish portfolio includes close to €11 billion in property located in Co. Dublin and €2 billion located in Co. Cork.
  • The Agency’s €11 billion portfolio in Britain includes approximately €6 billion located in London.
  • The Northern Ireland portfolio (€1.3 billion) includes approximately €600 million located in Belfast.
  • The portfolio also includes approximately €1 billion of property located in Germany and more than €400 million in the US, with the bulk of the remainder in Portugal, France and Belgium. 

Impairment charge/Income recognition

The Agency recognised an impairment charge of €1.27 billion for 2011, compared with €1.49 billion in 2010. This brings the total impairment charge to €2.75 billion, equivalent to over 9% coverage. The impairment charge followed a rigorous review of expected cashflows from loans held by NAMA-managed debtors, which was also subject to independent scrutiny by external advisors and the Comptroller & Auditor General. Loans that are managed by participating institutions on the Agency’s behalf were subjected to a collective assessment based on evidence of impairment emerging from the largest cashflows in this part of the portfolio.

The NAMA Board adopts a conservative approach to impairments and income recognition. It has decided on a prudent basis not to recognise unrealised surplus income of €1.82 billion in its income statement (P&L) arising from its analysis of unrealised surplus cashflows from debtors. These surpluses in part reflect actual transactions and other observable evidence which point to more normal levels of activity and better sentiment in general in key markets where the assets are located.  

Credit management

From inception to end May 2012, the Agency made approximately 11,000 credit decisions. 90% of these were approved. The average turnaround time for credit decisions was 6.1 days at the end of December 2011 – this has reduced to 5.2 days by June 2012. 

Debtor engagement/debtor business plans

Almost 600 individual debtor business plans were assessed during 2012. The assessment of all 800 or so such plans had been completed by end June 2012.

In working with debtors, through advances of new funding and overhead allowances, the Agency directly supports approximately 10,000 jobs spread across a number of locations and business sectors. 

Cash

The Agency ended 2011 with cash balances of €3.8 billion, having generated cash receipts of €5.1 billion from debtors during 2011. By mid-July 2012, the Agency’s total cash receipts since inception exceeded €8.4 billion. In June 2012 the Agency’s strong cash balances enabled it to redeem €2 billion in NAMA Senior Notes, bringing to €3.25 billion the total amount redeemed. The Agency is very confident of its capacity to meet its initial target of redeeming €7.5 billion in Senior Notes by the end of 2013. 

Website

The list of enforced properties on the NAMA website is being enhanced to make it easier to search and also there will be links to sales agents’ websites with pictures and additional details of properties. This will be launched within the coming days.