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Nama's Business Plan

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Nama's business plan was published last night. It is of particular interest as my business specialises in business planning and financial projections. Having seen hundreds of plans and projections, I have learnt to take most projections looking beyond 2-3 years with a pinch of salt.

Nama's plan projects a profit of €5.5 billion by 2020 even after overpaying €7 billion for loans and incurring expenses of €2.6 billion. This is absolutely incredible and laughable if it was not so serious.

Surely, these glowing projections undermine the need for Nama and beg the question as to why the banks' shareholders are not lining up to get a share of the action. In truth, the plan's projections are "best case" and, as a specialist in business planning, I'd advocate a much more conservative set of numbers with lower repayments and interest income, higher defaults, higher debt interest and expenses and a higher discount rate. This scenario would be much more realistic and would explain why the banks are so enthusiastic about Nama.

Having originated the Double/Double/Half Rule (double time, double costs and half revenues), I'll like to see it applied to the Nama projections.

More seriously, an independent review of the plan's projections is essential before any further steps are taken. I'd love to see Justice Clarke of the High Court review the plan in the light of his devastating assessment of the financial projections accompanying the Zoe Group companies' application for examinership.

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This page contains a single entry by Brian published on October 15, 2009 12:25 PM.

Politicians' Expense Scandal is Small Fry was the previous entry in this blog.

Nama - A Flawed Business Plan is the next entry in this blog.

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