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The banks will need an additional €6bn of taxpayers' cash if the government imposes a larger-than-expected discount on the €90bn of impaired loans it plans to buy from lenders, leading banking analysts believe.
But the government may need to tap only €3bn of any extra cash from the exchequer to fund Anglo Irish Bank, Irish Nationwide and EBS, because the improving performance of the global investments held in the National Pension Reserve Fund (NPRF) could meet the final cash demand from stock market-listed AIB and Bank Of Ireland. The NPRF is currently directed by law to invest in stock market-listed banks only.
The new estimates are based on authoritative figures in the IMF report on Ireland published in June, which indicated that the Irish banks would swallow €26bn in total recapitalisation cash to cover all their loan losses, including write-offs for the discounts.
Speculation about the amount of the discount that Minister for Finance Brian Lenihan will reveal to the Oireachtas on 16 September continues to grow this weekend but experts say that paying out a larger-than-expected average discount of 30% would still limit the amount of the additional taxpayers' money the five lenders would need at €6bn.
Experts, who did not want to be named, said large amounts of the €26bn bill have already been covered, including €7bn in loan losses the banks have already absorbed, and another €11bn that the government has already injected or pledged to put into AIB, Bank of Ireland and Anglo Irish.
The new forecasts suggest the extra cash that the banks will need from taxpayers will drop to €6bn when the capital gains that the lenders make by buying back some of their own bond debt at reduced prices are also accounted for.
The extra cash for the five Dublin banks that are likely to participate in Nama may still be difficult to sell to the electorate because of the perception that banks and property developers are getting off lightly.
Imposing a discount of 30% on the banks may help dispel this perception, analysts said.
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Buying at 30% does not dispel my skepticism. Personally, I have been offered sites in Dublin city for "growing potatoes on!" The average Joe Soap tax payer has no clue whatsoever about the value of the useless "assets" that are being lined up for them to be saddled with. Why would you refer to a Liability, that nobody wants, as an "asset". NAMA should have been called NLMA "The National Liability Management Agency" but that would be giving the game away! These are not assets they are positively toxic liabilities waiting to be sold, at inflated prices to the tax payer. It is a transfer of wealth from the state straight to the balance sheet of the banks compliments of Gormley and Lenihan.
By the time ordinary people realize that the Greens and FF intend to sell them and their children into debt bondage it will be too late.