Bank of Ireland and Allied Irish Banks have urged their shareholders to back proposals to sell toxic real estate loans to Ireland's new bad bank scheme. The banks estimate they could receive a combined total of EUR 28 bn if the National Asset Management Scheme, or Nama, applies a discount averaging 30% to the face value of the loans.
Bank of Ireland and Allied Irish Banks have urged their shareholders to back proposals to sell toxic real estate loans to Ireland's new bad bank scheme. The banks estimate they could receive a combined total of EUR 28 bn if the National Asset Management Scheme, or Nama, applies a discount averaging 30% to the face value of the loans.
Bank of Ireland warned that failure to back the scheme would likely lead to more state intervention and possibly nationalisation. The bank said that if it participates in the scheme it could be required to transfer up to EUR 16 bn of assets, or 12% of its loan book, from its balance sheet to Nama at a discount of not above 30%.
Allied Irish Banks CEO Brendan McDonagh said during an analysts call on Monday that his bank had no alternative executable option to the Nama scheme. The bank estimates Nama could pay EUR 17 bn for about EUR 24 bn of land and development loans and other associated facilities.
Nama is to be established in the next few weeks and will start buying around EUR 77 bn of loans by mid-January to sort out Ireland's crippled banking system.
Irish banks were major lenders to Irish developers and investors active in the UK and Europe during the boom years. The subsequent fall in property valuations and the economic downturn sparked by the credit crisis has left a major portions of these loans in distress.
Values have fallen by more than 45% in the UK and by up to 50% in Ireland. The Irish government had to step in and provide billions in support to Bank of Ireland and Allied Irish Bank. At the beginning of 2009 Anglo-Irish Bank, a major property lender, was nationalised to prevent its collapse.
