These were posted on another thread but I think they need a wider audience:
The six banks in normal times (which are what we're trying to get to) make over 6 billion profits, an average of 1 billion each. The 167 million represents 16.7% of profits, leaving 83.3% with the banks.
As I said before it could be over a longer period, it could be levied on other banks and I do not expect the NAMA losses to be anything like 20 billion.
That's a bold statement. What is 'normal times'?
The competitive advantage that gave us the Celtic Tiger has been destroyed by the Property Bubble. Are normal times the pre-1997 years? They're definitely not the post 2002 years. I'd say in the medium term pre 1997 levels of profits would be very ambitious. Post 2002 profits will not be seen for generations.
In light of Hal's comments regarding profits of the banks in 'normal times' I have in front of me the Annual reports for AIB and BOI, the largest of the six Irish banks for the year 2001 including a five year summary for the years 1997 to 2001.
This is a period when it could be argued that the Irish economy was experiencing healthy growth. It ended with the Dot Bomb and the 9-11 bombings and our shift in focus to concentrating on the property bubble as the main driver for the economy. Those years from 1997 to 2001 would represent a best case scenario for the medium to long term performance of the Irish economy.
The profit figures for those years were as follows for the two largest banks:
2001 EUR484,000,000 (After Michael Rusnak, but no guarantee against exceptionals in future years either, so perfectly valid)
These figures do not correlate with Hal's statement regarding profits of the six Irish banks in 'normal times'.
Further to the above I have the 2001 annual reports for Anglo Irish Bank, Permanent TSB and Irish Nationwide in front of me now.
2001 EUR 049,600,000
2000 EUR 284,200,000
1999 EUR 294,400,000
1998 EUR 244,300,000
1997 EUR 210,200,000
Anglo Irish Bank:
2001 EUR 147,400,000
2000 EUR 108,900,000
1999 EUR 074,400,000
1998 EUR 048,000,000
1997 EUR 030,700,000
Irish Nationwide (Pre-Tax):
2001 EUR 077,000,000
2000 EUR 064,000,000
1999 EUR 038,000,000
1998 EUR 032,000,000
1997 EUR 032,000,000
Finally the figures for EBS. Contrary to Hal's statements the best case scenario combined profits for the six banks in 'normal times' are likely between EUR1,500,000,000 and EUR2,000,000,000.
2001 EUR 030,100,000
2000 EUR 020,700,000
These are the only figures available for the EBS.
Some good research there Mr. Hanley
If you take the year 2000 there was about 2 billion profit between them, an average of 333 million.
Wage inflation since 2000 has been on average between public & private sectors about 55/60%. This increase in wages is what drives increases in turnover and in turn profits and it has nothing to do with property prices.
On that basis taking the average profit of 333 million profit in 2000 and just increasing it by wages inflation gives you an average figure of over 500 million each for the six banks. On my previous figures of a 16.7% levy take over 20 years that would increase the % take to about 33%, still well within range for what they will pay to stay alive.
Remember the 33% is based on 20 billion losses, a figure I wouldn’t expect and restricting the levy to only banks involved with NAMA, a proposition I don’t accept either, you also have a longer time period as one more variable.
With a combination of the above variables you could lower the levy to 5/10% with no problem at all, the decision will be ours to make.
The levy stands as a viable method of loss recovery for NAMA
The increases in wages had everything to do with property and are unsustainable. They will have to be reversed, Ireland is entering a period of massive deflation, which is completely necessary as we seek to restore competitiveness. The figures I posted are a best case scenario for the Irish banks over the medium to long term. In the short term they are going to fall long short of those figures.
I'll credit Mr SPN that he is correct in recognising that it will be either the customers of the banks or the taxpayer that will end up paying off the levy. It's inevitable.
According to Hal the effect of the property bubble did not impact on wages in the general economy. This despite over EUR90,000,000,000 in mortgage debt being pumped into the economy in the 6 years from 2002 to 2007. Coupled with the bad development loans this is over EUR180,000,000,000 of property related debt pumped into the economy over a short period of time. It's delusional nonsense to suggest that this did not cause huge inflation. The banks will not be able to repay these debts while deflation is increasing their magnitude.
CSO - News and Events : Press Release Construction and Housing in Ireland 2008 Edition
That is a misrepresentation of what I was saying. I said the level of wages now as against the year 2000 was not connected to the property bubble in the sense that the wage levels of today are not going to go away because the property bubble has burst and therefore will have an effect on the level of bank turnover & therefore the level of bank profits.
In that context AIB reported 1.7 billion trading profits for the first six months of 2009, an increase by a factor of 4 on their profit levels of 2000.
Honest debate please.
That's actually not what you said, regardless of whether that is the message you intended to convey. The wage inflation will have to be reversed because there is no money to pay those wages. We have had a huge increase in unemployment, under-employment and wage cuts/levies. You're failing to recognise the reality of the property bubble and the fallout from it's burst.
Honest debate indeed. AIB made a half year loss. I am an AIB shareholder. I will get no dividend this year.
The 6 Irish banks will consolidate to become two or three banks in the short term whether they are in public ownership or not. Those two or three banks will not have combined profits in excess of EUR 1,000,000,000 before government levies in the next five years. They will not have combined profits in excess of EUR 1,500,000,000 before government levies in the next ten years. And they will not have combined profits in excess of EUR 2,000,000,000 before government levies in the next twenty five years.
1. You are contending that private sector wages will decrease by 33% and public sector wages will decrease by 40%, absolute nonsense, not a dog’s chance.
2. AIB made a trading profit of 1.7 billion for the first six months of 2009, in the worst six months trading in Irish banking history, that is a fact. You can argue it until you are blue in the face, but a fact it will remain.
3. You have no basis whatsoever for you banking profit predictions. The only small bit of evidence we have at all is the already mentioned AIB six months results and they do not support your predictions in any way.
That is your opinion, one which has no basis other than your own cognitive dissonance.. I would contend that as a result of rising unemployment, underemployment, government levies and wage cuts we are well on our way in that direction and have a long way to go.
That is pure spin. AIB made a substantial half year loss as a result of it's necessary and likely understated bad loan provisions. It's operating environment is not going to improve any time soon either.
I have already outlined the basis for my predictions and they have a much stronger basis in fact and reality than your outlandish predictions of combined profits of EUR6,000,000,000 in 'normal times'.
No it's not.
Operating profits are ongoing (if they can trade profitably in the first six months of this year, they can make profits anytime) whereas write offs are once off. A clear difference regarding future profitability whether you care to acknowledge that or not.
And then from another thread:They are still recognising operating profit on loans that are likely to be distressed in future. They have also under-recognised the bad loan provision so while the current write-offs are once off, there are further substantial bad loans provisions to be made against those bad loans. Their 'once-off' write offs are to become a regular feature and the operating profit they are recognising on loans that will end up impaired will also dissapear when they are forced to restate these results in coming months and years.
1. Current bad loans provisions are inadequate.
2. Substantial further bad loans are to be recognised as the economic situation deteriorates.
3. Operating profit currently recognised against loans yet to go bad will have to be restated in future years.
...The banks cannot afford to pay a levy and even if they could investors would run a mile. A levy wouldn't be much different to nationalisation because while the government wouldn't hold majority stakes they would garnish the majority of profits for decades to come.
What about your hypothesis that the banks earn EUR6,000,000,000 between them in 'normal times'? Or that the government will legislate for a levy post NAMA? Neither of those statements has any basis in fact.
The banks earned over 6 billion between them in 2008, I think it was, possibly 2007 but anyway after the property bubble had burst. I think you forget that a large source of income for the bank is from on going mortgage repayments, these do not go away (not for 20 + years anyway) just because large numbers are no longer buying property, the repayments and bank profit go on for a long time after any slow down.
On the levy, it has been said by NAMA & the Government that if & when necessary it will happen and not just to the media, this was also part of the IMF report. You choose not to accept it will happen, that's your choice, but you have no basis for believing that.
...The banks were refusing to recognise their bad debts at that time. The currently distressed loans were on their books at that time and were showing signs of stress. Like now they were recording profit against loans that would eventually be write-offs.
You fail to recognise that the banks are still recording profits against development loans and mortgage loans that will eventually have to be written off. The banks will have substantial mortgage write-offs in the medium term.
You also fail to recognise that the largest combined profits recorded by the banks before the property bubble were EUR2,000,000,000 and profits since then have been on the back of over EUR180,000,000,000 of property related debt that was pumped into the economy.
I have no basis to believe that there will be a levy. There has been no legislation published in this regard. The Irish government are not the IMF, I'd have a lot more trust in the IMF.
It would be particularly useful if Hal addressed the point that NAMA with a levy is essentially the same as Nationalisation. The profits would be nationalised and the value of the shares would be negligible.
Or the point that NAMA without a Levy while purchasing at a price in excess of market value is a gift/subsidy to the banks that the taxpayer will have to pay back.
Or that NAMA paying market prices for the assets achieves nothing that selling the assets on the open market wouldn't.
NAMA is dead in the water and nationalisation (temporary or otherwise) will be necessary.
That’s right fellow posters, I ran away because you were asking hard questions.
It’s not that they have been asked 6 times before and answered each time, nor is it that you just didn’t agree with or like the answers nor is it that you seem to ask the same questions directly after it’s just been answered as if you might like the second or third answer better. No it’s that I don’t like the questions, sure that’s why I started posting in the first place, to get away from the hard questions I was asking myself. You’re on your toes and no mistake, right on the money, there’s no fooling you lot. I should have known better.
It all make sense when you think about it, doesn’t it.
You've provided no meaningful response to the points above Hal. Either you're seriously deluded or you think you can take us for fools.
“meaningful” now that would be a matter of opinion, would it not.
What you have in your post there is one statement that NAMA is the same as nationalisation, well no it’s not, if it was they’d call it nationalisation. It differs from nationalisation in that the banks are not nationalised, it leaves bankers to run the banks and the Government to govern. It leaves the banks free to raise private money, it leaves the banks free to do whatever they have to do by way of cost cutting to ensure they can maximise profitability as soon as possible, it leaves the banks to deal with their shareholders & bondholders and staff. It leaves the Government free of having to deal with bank staff who otherwise would suddenly find themselves public sector workers and they might just get to like it that way.
Other than that you have one situation which doesn’t arise and therefore doesn’t require any comment from me, one situation that shows you have missed to whole point of having NAMA in the first place, that is not to allow all the property to be dumped on the market at one time and lastly you have your opinion that NAMA is dead in the water. I can’t see that any of that needs any comment from me, they're your opinions, enjoy them.
Meaningful as in having some grounding in reality.
I said 'essentially the same as Nationalisation', I didn't say it was Nationalisation, it is however quit similar.
The value of shares will be negligible and there will be no dividends. There will be nobody to govern the banks. The banks will exist to pay the levy but will have no shareholders because the shares have no value.
1. They can raise no money if they are worth nothing.
2. There are no cost cutting measures that could boost profits enough to provide any upside in under a decade.
3. The banks will have no shareholders because the share value will be negligible and no dividend will be paid.
This is the only reason for NAMA and a poor one at that. These workers will be working for zombie banks with no governance just so that the government can avoid taking them on.
You're quite right that I don't get the point of NAMA. I'm not alone in that. NAMA is effectively a poor version of nationalisation.
And here we are...Another point from another thread that Hal fails to address and has run away from.
Hal has claimed that the combined profits for the six Irish banks in 'normal times' will exceed EUR6,000,000,000 per annum. The combined profit for the six Irish banks during the 'real Celtic Tiger' from 1997 to 2001 never exceeded EUR2,000,000,000. Only during the property bubble when over EUR180,000,000 in property debt was pumped into the Irish economy did the profits ever exceed EUR2,000,000,000 per annum.
The combined profits of the Irish banks never exceeded EUR 2,000,000,000 in 'normal times' and even when the economy was performing at it's peak in the period of 1997 to 2001 did the combined profits even come close to EUR2,000,000,000.
During the 'real Celtic Tiger' the Irish economy was in rude health. There is neither guarantee nor high probability that these conditions will be reproduced in the coming decades after the damage done to our society and economy by the property bubble.
Hal claims that the operating profit of the Irish banks are more important than the trading profits. This relies on the assumption that the banks can trade out of their difficulties and maintain operating profits while avoiding further bad debt provisions. This would require them to:
1. Not recognise any further bad debts.
2. Not further write down the value of their bad loans.
3. Continue to recognise profits on bad loans.
There is no basis in fact for these assumptions.