INBS - 2008 Annual report

I thought this was worth a separate thread, at least for a while. … R%2008.pdf
Angry at the first statement:

Two carts in front of the horse?

On Funding:

Holy Moly (if that is not going to land me with a 100k fine), a 34% haircut on their ECB repo? How have the wizards managed this?

Um, that sounds rather like wind-down to me.

Turning to derivatives (my favourite bit even though I don’t understand them, but it’s like saying “turning now to the cases of ebola at the bank…”):
2007 - 204.4
2008 - 479.4

2007 - 16.8
2008 - 27.9

From the Notes:

Fingers also has a directors loan of 1.3 mn… (p.61 Adobe p.62).

860 mn commercial loans past due at least 3 months (10.5% of commercial loan book)
401.9 mn residential loans past due at least 3 months (17.5% of residential loan book)
Residential performing worse than commercial?!

This is a horror story. Greater than 3 months arrears is serious. The arrears rate on residential looks wrong (not questioning your figures, I’d a quick look and get the same rates). Have they converted developers’ debt into resi mortgages (where the developer is the borrower)?

A very substantial portion of the commercial debt is interest roll-up. I guess that by definition, these can’t be in arrears. It’s not clear what provisions relate to Interest Roll-up.

Of their Interest income of €986.1m

Good luck getting this money.

The treatment of roll-up is what I’ve banged on about for Anglo.

Yeah, the residential figures were a bit of a shock, I’m surprised it hasn’t been picked up in the meeja. It can’t be a mistake, surely, given that these are audited figures?

Could the residential include BTL?

I agree with you about the rolled-up interest. I’ve been banging on about this too (in the form of what can be recognised as revenue).

17.5% of residential in arrears! That is an order of magnitude worse that any other bank in the country. It is literally beyond belief. Somebody is telling porkies.

Beats me why this isn’t making waves. Maybe they don’t have the smarts to recognise a big story. I can’t see it being a typo. Perhaps we’ve interpreted the data incorrectly, but I don’t think so.

BTL (a la 2gaffs) would be considered residential.

I think there was a story last year that some banks were getting developers to convert developer debt to mortgages on completed houses. If this was happening, then such arrears rates might make sense. It certainly seems that something more to INBS resi arrears that needs to be explained. 17.5% arrears on their total resi mortgage book just seems too high. If so, what is their arrears rate on 2006 mortgages.

Keep banging. Were you able to figure out what provisions INBS has for these loans?

Given the small size of their residential book, a comparatively small number of large defaults could impact on the overall ratio.

No, or rather, I could see where they say they have x in loan provisions due to conservative provisioning at the start of 2008, but not what the final figure was. I couldn’t work out what the loss meant either - was it real money off the provisions?

The figures were too complicated for my little head:
arrears >= 3 months * 80% (expected default rate off the top of my head) * 40% (recovery rate for residential)
same for commercial, but with 100% default rate and 30% recovery
rolled up interest added to these figures? Or are these the mortgages that the rolled-up interest is from?

So I don’t think there is transparent enough information or rather there is too much information (pages and pages of blurb to deter the inquisitive, but lazy (me))! So the info might be there, but I can’t see it.

Could be. Mortgage provider to the stars and all that. Which does raise the point about another limitation I would like to see come in - a limit on the maximum amount that a financial institution can lend to an individual, company or group of companies from the point of view of the institution’s risk, not the individual’s.

Alot in that report, i took a few snips but loads more in the document

The document is full of this kind of thing:

Good ole Regulator - you show em!

Best Wishes

Great Business Plan - actually my dog came up with one quite similiar earlier. He is a collie though.

Check out the very last line in this one - I think its a misprint it probably should mean “taxpayers will support borrowers…”

Exposure to Commercial

I wonder did Fergus Murphy of EBS see this Report last week: it would explain why he told the Indo that “if the Government were to allow troubled Irish Nationwide to fail, the decision would reverberate through the financial markets. If that happens, we will be living with the cost of that for years in terms of our reputation abroad.”

I thought that was an odd comment in light of the State Guarantee but perhaps he feared that the Government would have second thoughts when they saw the INBS Annual Report.

Murphy also sees a future for EBS with INBS residential assets.

He can’t have seen the report if he thought there was a future for the residential loan book. Unless it was detoxified by the government… much like the Permo wants from the government before it takes over EBS, I believe…