IBRC annual report for 2011 - Irish Bank Resolution Corporation ...

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Notes to the financial statements continued14. Gain/(loss) on disposal of assets to NAMA 2011 2010€m €mFair value of consideration received 914 10,728Carrying value of assets transferred to NAMA (106) (21,924)808 (11,196)Other transfer adjustments and provision for servicing liability (32) (351)Gain/(loss) on disposal of assets to NAMA 776 (11,547)During the year the Bank has recognised a net reduction of €776m in the overall reported loss on disposal of assets to NAMA.This results primarily from settled valuation adjustments relating to the completion of full due diligence by NAMA on assetspreviously transferred. €296m of the net reduction relates to INBS assets and has been recognised during the six months ended31 December 2011.Since December 2010 NAMA has completed full due diligence on €14.8bn of loans, of which €4.8bn relate to the former INBS.At 31 December 2011 NAMA had yet to complete due diligence on €7.8bn of loans. This due diligence work was substantiallycompleted in March 2012 and resulted in the Bank owing NAMA approximately €24m in respect of valuation adjustments. Thisamount was accrued in full during the year ended 31 December 2011.During 2011 the Bank received nominal consideration of €971m, 95% in the form of NAMA senior bonds (note 26) and 5% inthe form of NAMA subordinated bonds (note 24), representing the net amount owing to the Bank following the completion ofdue diligence on €14.8bn of loans, the settlement of certain valuation adjustments and repayments to NAMA of considerationpreviously received in respect of a small number of ineligible loan assets that were transferred back to the Bank.The final overall loss on disposal will only be determined when full due diligence has been completed by NAMA on all assetstransferred.Further information in relation to the loss on disposal of assets to NAMA is provided in the Business review.15. Loss on deleveraging of other financial assets 2011 2010€m €mConsideration received 4,965 -Carrying value of assets sold (5,391) -Total loss on disposal (426) -During the year the Bank sold the majority of its US assets. Loans with a gross value of €6,060m (before provisions forimpairment of €1,219m), together with related derivatives with a fair value on date of disposal of €195m and investmentproperty classified as held for sale with a carrying value of €47m were sold, realising a loss of €343m. Total externalprofessional fees incurred on the US bulk sale transaction amounted to approximately 30bps of the gross assets sold. The USloan book was principally classified as loans and advances to customers at 31 December 2010.In addition, the Bank sold certain UK and Irish loans with a gross value of €414m (before provisions for impairment of €113m),and related derivatives with a fair value on date of disposal of €7m.The loss on disposal includes costs directly associated with the sales transactions.68
Irish Bank Resolution Corporation LimitedAnnual Report & Accounts 201116. Provisions for impairment and other provisions 2011 2010€m €mLending impairmentLoans and advances to customer - specific (note 27) 2,107 4,956Loans and advances to customers - collective (note 27) (597) 21Loans classified as held for sale - specific (note 23) 34 2,6831,544 7,660OtherInvestment property classified as held for sale (note 23) 17 -Debt securities - available-for-sale ('AFS') financial assets (note 24) - 11Investment property - held on own account (note 32) 3 61Property, plant and equipment (note 34) 4 -Financial guarantee contracts and other provisions76 35100 107Total provisions 1,644 7,767The total specific lending impairment charge for the year of €2,141m (2010: €7,639m) reflects the continuing difficultoperating environment across all of the Bank’s core markets during the year. Ireland, where property market conditionscontinue to be stressed, represents €1,557m (2010: €5,813m) of the total charge. The remainder comprises €574m (2010:€737m) in respect of the UK and €10m (2010: €1,089m) in respect of the US.Of the specific charge, €62m relates to impairment recognised since 1 July 2011 on the residential mortgage portfolio acquiredunder the INBS Transfer Order.The collective provision is applied to portfolios of customer loans for which there is no evidence of specific impairment. It hasbeen calculated with reference to historical loss experience supplemented by observable market evidence and management'sjudgement regarding current market conditions. The provision amount is also adjusted to reflect the appropriate lossemergence period. The loss emergence period represents the time it takes following a specific loss event on an individual loanfor that loan to be identified as impaired. This is determined by taking account of current credit risk management practicestogether with historical loss experience. The loss emergence period applied for the current year is six months (2010: sixmonths). The release of collective provisions of €597m in the current year is primarily due to a decrease of 41% in theperforming loan portfolio, including loans classified as held for sale, and the recognition of specific provisions on smallerrelationships not previously individually assessed for impairment.Additional information in relation to the lending impairment charge for the year is provided in the Business review.Total impairment on investment property of €20m (2010: €61m) reflects continued weakening economic conditions in themarkets where the assets are located.Financial guarantee contracts and other provisions in the current year includes an additional charge of €12m (2010: €45m)relating to an internal review of historical interest rate setting procedures as applied to certain loan accounts (note 41).69
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Irish Bank Resolution Corporation L
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ContentsIrish Bank Resolution Corpo
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Chairman’s statementIrish Bank Re
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Group Chief Executive’s reviewIri
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Group Chief Executive’s review co
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Business review continuedIrish Bank
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Board of DirectorsIrish Bank Resolu
Page 19 and 20: Corporate Responsibility continuedI
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