Banks in 'weak' position on NAMA - RTE

[geri]

An analysis by Citigroup has estimated that the sale of property-related loans to the new National Asset Management Agency (NAMA) could lead to losses of almost €8 billion for AIB and €5 billion for Bank of Ireland.

The report estimates that AIB and Bank of Ireland will transfer €30 billion and €20 billion of loans respectively to NAMA, making up 60% of its assets.

Citigroup says that the banks are in a weak negotiating position, and that the loans of up to €90 billion could be bought by NAMA at a discount of 25%. It says this would translate into losses of €7.9 billion for AIB and €5 billion for Bank of Ireland.

RTÉ Business: Banks in 'weak position' on NAMA - report

My last check on Sharewatch indicates that the bank shares are falling following this warning, not as sharply as you'd expect however. The report also suggests both banks will need more capital injections, just the tidy sum of €3.3 billion in total between them though, so no great worries there, eh?

So what happens next?

[Murra]

RTÉ Business: Banks in 'weak position' on NAMA - report

My last check on Sharewatch indicates that the bank shares are falling following this warning, not as sharply as you'd expect however. The report also suggests both banks will need more capital injections, just the tidy sum of €3.3 billion in total between them though, so no great worries there, eh?

So what happens next?

As I understand it, if there has to be more capital injection, (and I believe the banks will have to go for that) then the Govt will have even more shares in the banks... thats a good thing - right?

[seabhcan]

Answer me this:

The NAMA plan is to take these assets off the banks books so that the Banks will be clean and risk free, and private investors will happily buy their shares again.

But the government also says that they will charge a levy on the banks if the NAMA assets make a loss when they are ultimately sold. So the banks still have a risk... So whats the point?

[mollox]

According to last Monday’s Irish Times
“certain senior figures in Government circles believe a 50 per cent discount should apply” to the value of assets to be transferred from the banks to NAMA.
And
“Government sources said that the new agency was unlikely to employ any Irish estate agencies for the purposes of valuing the properties”

Cabinet to move quickly on setting up of Nama - The Irish Times - Mon, Apr 13, 2009

The IT only names Dan Boyle but says that other unnamed senior politicians have also expressed the same view re 50% discount.

Apart the ongoing feeding of populist anger and using the banks as a lightning rod to deflect criticism for the state of the public finances away from the Oireachtas, on what basis would “certain senior figures in Government” arrive at a 50% number, never mind feel it appropriate to offer a view on the likely valuation of the loan books of individual banks at this point in the exercise?

The whole thing smacks of a tainted political exercise in hand-wringing, hand-washing, bank-bashing. It wasn't enough for Lenihan to announce that the Govt would keep any ultimate profit, but in the event of a shortfall they'd impose a levy on the banks?

If the Irish Times report is accurate, a “smash & grab” raid on the banks is planned – which would also help to explain the weakness in the share prices this week and the views of domestic and foreign analysts.

The scope of the banks to resist is limited, but they should use every means possible to block any Govt attempt to effectively expropriate their assets.

The primary duty of bank boards and executives is to protect what remains of shareholders value, rather than concern themselves with the public interest. The latter is the responsibility of the Govt & the Oireachtas, though they haven’t shown much skill in that regard over the past decade.

The interests of Bank shareholders would be better served by severely slimmed-down Zombie banks, with some long-term hope of recovery, than by nationalisation, which will extinguish entirely their investment interest. Zombie banks won’t serve the national interest, but that’s not the concern of the banks or their shareholders.

I presume bank managements are actively working on such alternative strategies, in the event that NAMA is perceived to be acting in the manner suggested by the IT report.
If the political, media and popular view is “******************** the shareholders”, then shareholders can justifiably adopt a “******************** the national interest” stance.

[Murra]

The scope of the banks to resist is limited, but they should use every means possible to block any Govt attempt to effectively expropriate their assets.

.

And vice versa! Who's side are you on Mollox?!

[mollox]

And vice versa! Who's side are you on Mollox?!

The shareholders, of course!

[bluefish]

If Aib and Boi need a further investment of 12-15 Billion, I would like to know where our government are going to find this money?

Not to mention the 90 Billion Nama need to buy the debt!

[Vega1447]

The shareholders, of course!

Shareholders should be bailed out.

Jesus Christ on a Bicycle...

I bought shares in 1988 (via an endowment mortgage) - noticed that they were going south in 2007 - cashed in and saved about 60K.

No-one advised, helped or bailed me out.

So, Mollox; you think people thick enough to *still* own shares in BoI and AIB should be protected from their stupidity?

[caveman]

If Aib and Boi need a further investment of 12-15 Billion, I would like to know where our government are going to find this money?

Not to mention the 90 Billion Nama need to buy the debt!

NAMA are not giving cash to the banks, they are giving them government bonds.

[mollox]

Shareholders should be bailed out.
Jesus Christ on a Bicycle...
I bought shares in 1988 (via an endowment mortgage) - noticed that they were going south in 2007 - cashed in and saved about 60K.
No-one advised, helped or bailed me out.

Fair play to you, you smug ********************.

So, Mollox; you think people thick enough to *still* own shares in BoI and AIB should be protected from their stupidity?

No, but neither do I think that the Govt has carte blanche to screw them via NAMA.

Particularly as they've been using populist bull to pass all the blame to the banks, when the big hole in the public finances is primarily the fault of successive FF-led Govts.