# NAMA Annual Report published



## Brendan Burgess (28 Jul 2011)

[broken link removed] 151 pages

[broken link removed]

[broken link removed]  The post below is my interpretation of the Key Figures

[broken link removed]






* NAMA’s Operating Profit for 2010 |€305m*
*NAMA’s Operating Profit for Q1 2011|€91m*
*Impairment provisions to end 2010|€1.5 b*
*Value of loans acquired by NAMA to date |€72 billion*
*Value of liquid securities made available to the banks|€30.5 billion*
*Value of asset sales agreed by NAMA to date|€3.9 billion*
*Number of receivers appointed by NAMA |73*
*Number of business plans reviewed /under review |151 *  .


Interest income received (mainly on debtor loans and derivatives) |525
  Interest expense (mainly on NAMA bonds and on hedge transactions)|(179)
*Net interest income|346*

  Gains/(losses) on derivatives| (17)
  Administration expenses|(46)
  Foreign exchange gains|22
*Operating profit before impairment|305*
*Impairment charges|(1,485)* *Basis for impairment charge*
  NAMA is required to report its results in accordance with International Financial Reporting Standards (IFRS). 
  Under IFRS rules, potential losses must be recognised immediately. By contrast, in cases where NAMA’s projections indicate that it will realise more than the carrying value of the loans (i.e. an expectation of profit), it is precluded by accounting rules from recognising such potential gains unless and until they are realised. 
  The fact that an impairment provision is taken at end-2010 does not necessarily mean that such losses will ever materialise.
  More information on the estimation of the impairment provision is provided in the Annual Report. 
*Acquisition*
  In 2010, NAMA acquired 11,500 loans of 850 debtors with nominal loan balances of €71.2 billion from the five participating institutions. It paid a consideration of €30.2 billion, a discount of 58%.
  It is estimated that 61% of the property assets securing NAMA loans are based in Ireland, 32% in UK and Northern Ireland and 7% in the rest of the world. An estimated 59% of the assets comprise investment property and 41% comprise land or property under development.
  12 NAMA debtors have par debt in excess of €1 billion each. This does not include any debt they may have with non-NAMA institutions.
*Debtor engagement*
*To date, a total of 151 draft business plans have been received from the 177 major debtors whose debt will be directly managed by NAMA. The table below summarises the current status of these debtors’ business plans:*

*Number of Debtors
*

*Decisions made by NAMA and communicated to debtor[FONT=&quot][1][/FONT]|90*
*Debtor business plans currently under review|61*
*Debtor business plans awaited[FONT=&quot][2][/FONT]|26*
*Total|177* [FONT=&quot][1][/FONT] This represents 77% (by acquisition value) of debtors directly managed by NAMA. 

[FONT=&quot][2][/FONT] Up to 12 additional debtor business plans may be submitted following completion of loan acquisition.


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## Brendan Burgess (28 Jul 2011)

From the Chief Executive's presentation 

Portfolio at 31 December 2010 


|total|land & development|Investment
  Ireland|€18b|€8b |€10b
  UK & NI|€9b|€3b|€6b
  USA & Europe|€2 b|€0.6b|€1.5b
  Total |€29 b|€12b|€17b .

Investment|48%
  Land|18%
  Residential|12%
  Hotels|12%
  Development|10%  Government & Troika target is for NAMA to generate €7.5 bn of cash by end 2013
  – 25% debt repayment

http://www.nama.ie/ [broken link removed] at 30 June 2011


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## Brendan Burgess (28 Jul 2011)

So, what do these mean? 

NAMA is a ten year project at least, so the results from one year, mean very little. They are not a basis to judge the eventual outcome. 

The profit of €305m is not material in the greater scheme of things. 

The key factors will be the value of the loans and the properties behind them.



> *Basis for impairment charge*
> NAMA is required to report its results in accordance with International Financial Reporting Standards (IFRS).
> Under IFRS rules, potential losses must be recognised immediately. By  contrast, in cases where NAMA’s projections indicate that it will  realise more than the carrying value of the loans (i.e. an  expectation of profit), it is precluded by accounting rules from  recognising such potential gains unless and until they are realised.
> The fact that an impairment provision is taken at end-2010 does not necessarily mean that such losses will ever materialise.


Under IFRS, they must recognise the potential losses immediately in their statutory accounts and they can't recognise potential gains. However, it does not stop NAMA putting in a note on what those potential gains might be. Such a note would have been very useful. I wonder can we assume that there were no unrecognised gains?


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## Sunny (28 Jul 2011)

I haven't had time to look at the report in detail but at first glance it looks positive (not the best choice of words I know). The press will hang onto the impairment charge and run with that but that is only part of the story. While the operating profit isn't huge, it is encouraging that the assets are creating enough interest to comfortable meet the interest due as there were many commentators saying that NAMA would be operating at a loss from day one. 

Brendan, as for your point about a note showing the unrealised gains, I am not sure publicising where NAMA have the loan book marked would be a great idea for commercial reasons. I am sure there were gains especially in the UK market.


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## Shawady (28 Jul 2011)

It would be useful to see how the irish loans are performing versus the UK loans.I remember reading last year that NAMA did well on some UK property.
I would be still concerned about the irish portfollio as as recent as this week it was reported that the June drop in house prices was the largest monthly drop for two years and irish property makes up 61% of whats on NAMA's books.
Is it possible they are selling some of their UK property now because the market is better and it is allowing them to make an operating profit last year?


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## Bgirl (28 Jul 2011)

Have had a cursory look through this.  Are the properties taken over listed in the report, I can't find them. Thanks.


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## Brendan Burgess (28 Jul 2011)

They are now on the website

[broken link removed]


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## Bgirl (28 Jul 2011)

Thanks Brendan.


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## tiger (28 Jul 2011)

Thanks for the summary Brendan.

Two lines that I'll pick out:

Value of asset sales agreed by NAMA to date €3.9 Bn
Actually the report only says sales _approved_, no indication if sales agreed or sold.  Also, I can't see how much they paid for these assets.

Value of loans acquired by NAMA to date: €72 Bn

So only about 5% of the loans to date.  Bit worring, there should be some "low hanging fruit" there.

It looks like from table 12 on page 30, the impairment is just 5% on €29 Bn of the loans assessed.

I wonder what Willie O'Dea has to say...


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