NAMA Losses on Loans Recoveries will be euro 12.78bn!
NAMA Losses on Loans Recoveries will be euro 12.78bn!
There is, inter alia, a fundamental error in the NAMA Business Plan.
The error amounts to euro 18.26bn as follows….
See Page 10 of the NAMA Business Plan (BP) , 3rd Bullet point assumption….
Barclays Bank in the early 1990′s did experience a default rate of 10% across its entire Loan Book (not 10% across only its Property Loan Book).
The entire Loans to Customers (Loan Book) of the 6 Irish Banks is euro 396.86bn (see Summary Overview Schedule dated 17th Sept 2009 PBM which I’ve already supplied to you as well, of course, to the Minister for Finance and Alan Ahearne etc., when I made my Alternative to NAMA Submission on 21st September – I’m attaching a copy of this Summary Overview Schedule to this email for your convenience).
Apply a 10% (leave aside for the moment the BP suggestion that it might be prudent to increase this 10% to 20%) default rate correctly to the entire Loan Book, i.e. euro 396.86bn = 39.86bn
NAMA BP Default Rate was increased from 10% to 20% for stated reasons in the NAMA
Business Plan assumptions and applied (incorrectly) to only the euro “impaired” NAMA Loans
euro 77bn = euro 15bn (i.e. 20% X euro 77bn)
NAMA BP Recovery rate Applied = euro 4bn recovered / euro 15bn default loans = 26.6%
Apply the NAMA Business Plan Recovery rate of 26.6% to the correct 10% Default Loans i.e.
euro 39.86bn = euro 10.6bn
NAMA Business Plan needs to be Corrected as follows:
|
Loan Defaults euro bn |
Loan Recoveries euro bn |
Loss euro bn |
|
| Incorrect NAMA BP |
15.00 |
4.00 |
11.00 |
| NAMA BP should be corrected to |
39.86 |
10.60 |
29.26 |
| Correction Effect |
24.86 |
6.60 |
18.26 |
The NAMA Business Plan, as presented, overstates NAMA Total Profit by euro 18.26bn at a 10% Default rate!!
The corrected NAMA Result based on NAMA’s own Assumptions is
euro 5.48bn less euro 18.26bn
making an OVERALL NAMA LOSS = euro 12.78bn!
Furthermore, based on my extensive professional experience in the whole area of Work-outs, Realisations and
Recoveries on defaulting Property Loans in the 1980′s, I would have no confidence whatsoever in the amounts and profile of Principal Repayments and Interest Income from Borrowers columns in Table 5 of NAMA BP on Page 10.
There are many more areas where I see the NAMA BP as materially inadequate. In short, I would dismiss the NAMA BP as a wishful thinking exercise, based on fragile and unacceptable/unsupportable assumptions and foundations, having little connection with reality or comparable historic situations.
Once again, please refer to the attached 1 Page Word doc. NAMA Loans Losses – Summary Projected
Alternative Realisations Outcomes -12th October Author:PBM. The PBM document was carefully prepared, and may be considered a well judged projection of what will be certain minimum NAMA Losses of euro 10.88bn and much more probable NAMA Losses of euro 17.81bn on NAMA Loans Recoveries.
To put the scale in perspective:-
A million seconds is……. . 11.6 days
A billion seconds is ……. 31.7 years
17.8 billion seconds is ….564.4 years
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