THE GOVERNMENT predicts that the National Asset Management Agency (Nama) will give a return to the taxpayer of €4.8 billion when the “bad bank” is wound up in 2020.
The forecast is contained in a draft business plan published by the Department of Finance last night showing the projections on the cost of running the loans agency and how it will be set up and operated.
Nama is expected to make a profit of €5.5 billion by 2020, which amounts to €4.8 billion when inflation is taken into account.
The Government plans to buy loans of €77 billion from five lenders through Nama at a price of €54 billion in a bid to unclog the banks of their most toxic assets and free up the flow of credit into the economy.
The plan anticipates borrowers owing €15 billion to Nama to default on the loans over the projected 10-year lifespan of the agency. Nama expects to be able to recover €4 billion of these loans by selling assets, mostly properties, backing the loans over four years from 2014 to 2017.
The Government expects the remaining €62 billion owing by borrowers to be repaid over the 10 years, primarily between 2013 and 2020 at about €7 billion a year.
The plan says this default rate of 20 per cent is based on “conservative and prudent assumptions” given the risk of a prolonged recession and the “concentrated nature” of the loans.
This compares with a default rate of less than 10 per cent experienced by Barclays in the UK in the early 1990s, according to the plan. Barclays was the hardest hit of the British banks during the collapse of the UK property market.
Minister for Finance Brian Lenihan last night again ruled out full nationalisation of the banks.
Speaking as Nama passed its first parliamentary hurdle at the end of the second stage vote on the Bill by 77 votes to 73, he said that full nationalisation posed risks to the funding of the banks and the State. “Total nationalisation is not the panacea that its supporters claim it to be.”
He accused the Labour Party of “scare-mongering” about Nama.
The banks are being paid €54 billion for the loans in Government bonds and subordinated debt – both types of State IOUs.
The Government expects to pay interest of €16 billion on this debt over the 10 years and to receive interest income of €12 billion over the same period from good borrowers who will repay their loans, according to the draft Nama plan.
The shortfall will recouped from the sale of assets and loan repayments by the good borrowers.
The Government expects the legislation establishing Nama to be passed early next month.
The agency will pay fees and expenses of €2.64 billion over its 10-year lifespan.
The Government plans to move the top 10 to 15 borrowers into Nama and to recruit 30 of the agency’s proposed 75 to 100-strong workforce before the end of the year.
The top 10 borrowers owe €16 billion, while the biggest 300, who will be transferred into Nama by next March, owe €50 billion.
The Nama plan states that Government officials are in talks with the British authorities about the impact of Nama on the UK property market and on the British-owned banks in Ireland, which include Ulster Bank and Halifax-Bank of Scotland (Ireland).
It remained unclear whether any foreign-owned banks would want to participate in Nama, according to the business plan.
Fine Gael will today launch 99 amendments to Nama which, the party says, will protect home-owners facing repossession.
The centrepiece of the proposals to amend Nama will be a “home-owner support scheme”.
Under the scheme, homes in danger of repossession would become a category of loans which Nama could acquire at market value, the party’s finance spokesman, Richard Bruton, said.