Strong Q2 results from NAMA

08 Nov 2018

Strong Q2 results from NAMA

NAMA's Q218 results, released yesterday, show a strong performance in the quarter, while the agency remains on track to materially outperform its lifetime profits guidance of €3.5bn. The agency generated net profits of €223m in the quarter, helped by fair value gains on its loan book and disposal gains.

Net cash provided by operating activities was an impressive €769m during Q2, of which €522m was used to redeem subordinated debt. Another €44m of this debt has been repurchased since the start of H218, leaving €1.3bn outstanding.

The agency also published its Section 53 Annual Statement setting out its objectives for the coming calendar year. This contained few surprises, with the agency’s objectives of eliminating debt; maximising its return to the Exchequer; and delivering key commercial (offices in the Dublin Docklands) and residential accommodation all well established. 

Permanent TSB: Strong lending growth in Q3 

PTSB’s Q3 trading update this morning showed new lending volumes in 9M18 increasing by 48% y/y to €1.0bn, giving it a market share of new mortgage lending of 14.7% YTD, vs 13.8% in H118, and implying 16-17% market share in Q3 itself. This is a confirmation of the continuing success of its reinvigorated commercial strategy (mortgage lending +49% y/y vs market +20%) and occurred even before the recently announced cut in the pricing for much of its fixed rate mortgage product suite. NIM for 9M18 was 177bps, unchanged vs H118, and guidance is for a stable NIM into the year end. 

Fully loaded CET1 was 13.9% at Q318 from 13.4% at H118 (transitional 16.7% from 16.2%), with the 50bps accretion mainly due to profits earned on the quarters and a small reduction in RWA, though the final adoption of the ECB’s TRIM outcome and the completion of the €2.1bn Project Glas NPL sale are expected to have a -50bps pro-forma impact on FLCET1 in Q418. Operating expenses and impairment charges were not disclosed but were in line with management expectations. NPLs fell by €0.1bn to €2.9bn (excluding Glas NPLs) during Q3, mainly due to further cures, with the NPL ratio around 15.9% now (total performing loans increased marginally to €15.3bn). 

Brexit developments

UK Cabinet members were allowed to read the latest draft of the withdrawal treaty yesterday, which is reportedly now 95% complete. Of course, the main sticking point remains the text on the backstop on the NI/RoI border, which was reportedly absent from the draft given. Chief EU negotiator Michel Barnier warned that there is ‘more work to do’. Even so, there are reports that negotiators are meeting at the weekend, which could pave the way for UK and EU27 ministers to assess progress early next week.

If all goes well and of course it is an ‘if’, a special EU Summit could be arranged towards the end of the month. The process of passing the legislation though Westminster could take place in December. The recent air of positivity surrounding all things Brexit has meant that sterling is bid across the board. The benchmark EUR/GBP rate is currently sitting at over five month lows of just over the pivotal 0.8700.

UK RICS survey hits multi-year low

This morning’s UK (October) RICS survey showed that the house price balance had weakened to a six year low of -10% in October, disappointing consensus and Investec expectations for it to hold steady at -2%. Activity metrics were also weaker, with new buyer enquiries falling to -14% (from -12%) and the newly agreed sales balance coming in at -10% (previously -9%). Though the sales expectations balance was a less downbeat -6% (from -15%), the price expectations balance only saw a moderate improvement to -16% (from -17%).

Federal Open Market Committee Preview

The Federal Open Market Committee (FOMC) meets today and will issue its post-meeting statement at 7 pm this evening. There will be no Summary of Economic Projections (SEP), and this will be the last FOMC meeting without a post-meeting press conference.

The FOMC is expected to maintain the hawkish language seen in recent policy statements, while keeping interest rates unchanged this time. The Fed has raised rates three times this year as the U.S. economy boomed and inflation started to pick up, and it has signalled a rate rise in December, with two more hikes by mid-2019.

Economic Forecast

09.00 EZ ECB Economic Bulletin
13.30 US Jobless Claims
19.00 US FOME Interest Rate Decision