Ireland’s Bad Bank to Buy EU80 Billion of Loans at 30% Discount

Ireland’s so-called bad bank expects to pay a 30 percent discount on 80 billion euros ($115 billion) worth of real-estate loans it is buying in a bid to save the country’s financial system.

The National Asset Management Agency will start transferring the loans from lenders including Bank of Ireland Plc and Allied Irish Banks Plc next month, Brendan McDonagh, chief executive officer of the agency, told reporters in Dublin today. He said he saw no reason to change the government’s 30 percent estimate of the discount.

Ireland is creating NAMA to cleanse banks of souring loans after a slump in property values and the worst recession in the country’s modern history. Finance Minister Brian Lenihan has said the government is ready to provide capital to the banks as the transfer of assets accelerates their losses.

Irish house prices are now more than 40 percent below their peak in early 2007, the Irish Homebuilders Association estimates. Any declines in property prices in Ireland since NAMA forecast the 30 percent discount in September have been offset by developments in U.K. land prices, McDonagh said. He also said he expects the transfer of assets to be completed in the third quarter.

The European Union will probably approve NAMA within weeks, McDonagh said. It has asked the Irish financial regulator to oversee the transfer of assets and the watchdog has hired “a major international firm” to carry out that task, he said.

About 19 billion euros of loans will move to NAMA in the first group of assets, with half of the total portfolio moving by early April, the CEO said.

Allied Irish rose 1.1 percent to 1.63 euros as of 2:52 p.m. in Dublin. Bank of Ireland was unchanged at 1.69 euros. Ireland’s ISEF financial stock index rose 13 percent last year after losing about 94 percent of its value over the previous two years.

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