THE MAIN difference between Nama’s first business plan last October and yesterday’s revised plan was that the agency relied on the banks for the first and its own analysis for the updated version.

The difference is stark – plan A said that the agency would make €4.8 billion over its projected seven to 10-year lifespan; plan B is now targeting a €1 billion profit.

Plan A estimated that 40 per cent of loans – €32 billion of the €81 billion in loans to be acquired – were performing, meaning that interest was being paid in full. Plan B puts this at 25 per cent. In other words, about €12 billion in loans are now not performing that were initially thought to be.

Fine Gael finance spokesman Michael Noonan said the revised plan reinforced the massive risk the Government was taking with Nama. “Loans to Nama are deteriorating so quickly that their future value is almost entirely unpredictable,” he said.

Another major difference between the plans is the estimated fees to be paid. Plan A forecast fees of €2.64 billion over Nama’s 10-year life; plan B estimates that this will total €1.6 billion, including €215 million for 2011.

The €1 billion profit target is based on a 3 per cent rise in property values from current market values to Nama’s projection for long-term economic value (LTEV). Under this scenario, Nama will recover €44.7 billion on the loans to be acquired for €40.5 billion.

In the revised plan, Nama has also set best- and worst-case scenarios. The agency would make a profit of €3.9 billion if it recovered the LTEV plus 10 per cent. (This amounts to a recovery of €49.2 billion on the €40.5 billion loans.)

On the downside, the agency would lose €800 million if the market value fell to LTEV minus 10 per cent. (This amounts to a recovery of €40.2 billion.)

Brendan McDonagh, the chief executive of Nama, said he didn’t believe that the level of non-performing loans would fall below the 25 per cent level predicted. He said he provided a figure of 33 per cent to an Oireachtas committee in April as this excluded the loans of the 10 biggest borrowers at Anglo Irish Bank where non-performing loans were higher.

Frank Daly, Nama’s chairman, expressed his disappointment that the information initially provided by the banks did not stand up. He assured that the revised forecasts were “ground in reality” and based on intrusive analysis of the first €15.3 billion in loans it had acquired.

Mr McDonagh said that last year, when the banks provided the information, the lenders were “really fighting for their lives” and believed that the discount on the €81 billion in Nama-bound loans would be less than 30 per cent when it is coming in at 50 per cent.

There was a reluctance to accept reality, he said, but the banks had become more realistic.

“The institutions themselves were in denial about the quality of their loan books. They didn’t want to admit things were as bad as they were.”

Mr McDonagh said it was remarkable the banks did not employ property experts when they provided so much on property loans. The agency had put the banks “through the mill”, he said, and he was satisfied they were now co-operating with Nama. Mr Daly said the co-operation had improved but that it was “not 100 per cent” yet.

Mr McDonagh said that it was “an extraordinary surprise” when Nama discovered the banks had been allowing borrowers to use free cashflow for purposes other than paying loan interest.

Mr Daly said the banks had shown a sentimental or emotional attachment to the 10 biggest borrowers that Nama would no longer show.

Lenders could have taken a charge over a borrower’s income, Mr McDonagh said, yet when Nama asked about this, borrowers said the banks had never asked.

Nama planned to start taking control of that income, he said.

He wasn’t sure whether borrowers were using the “free cashflow” to fund their lifestyles, but he warned that developers “shouldn’t assume that they are back at the races” once in Nama.

Mr McDonagh said developers had “conquered and divided” by not disclosing their total level of borrowings to each of their banks.

Mr Daly and Mr McDonagh warned that borrowers would face liquidation if they didn’t co-operate or if their plans to reduce debts over time did not meet Nama’s detailed criteria or were not realistic enough.