Consortium considering investment in EBS

EBS COULD receive an investment of “a couple of hundred million euro” from a private equity consortium led by Cardinal Capital, ceding a large minority stake in the building society, according sources close to the consortium.

The interest expressed by Cardinal, which is controlled by businessmen Nick Corcoran and Nigel McDermott, was only made in the past fortnight and was at an early stage, the sources said.

There were several possible ways the consortium could invest, but it was encouraged that Minister for Finance Brian Lenihan said in his banking statement last week that he was open to EBS raising outside private capital, sources said.

Mr Lenihan said the building society would need an additional €875 million to meet the new core equity ratio of 7 per cent by the year end, as set last week by the Financial Regulator. “EBS is currently exploring the availability of private market capital and has had an expression of interest from a private party,” Mr Lenihan said.

If private capital was not forthcoming, the Government would invest the €875 million, he said.

Mr Lenihan plans to invest the first €100 million through special investment shares, giving the State effective control of the mutual.

Cardinal was part of the Irish-led Mallabraca consortium, which included foreign investors, that expressed an interest in Bank of Ireland in autumn 2008.

EBS transferred its first loans to the National Asset Management Agency (Nama) last Monday, moving €140 million out of €1 billion in loans going to the agency.

Meanwhile, Irish Life & Permanent (IL&P), the only domestic institution not requiring a State bailout, is assessing the possibility of buying the rump of Irish Nationwide after the building society sells 80 per cent of its loan book, or €9 billion in loans, to Nama.

The interest is understood to be exploratory and is being assessed in the context of creating a so- called “third force” in banking following delays in merger talks between EBS and Irish Nationwide, which must both submit viability plans to the European Commission.

The move is driven by IL&P’s interest in Irish Nationwide’s €5 billion in deposits, which would reduce the company’s heavy reliance on external funding.

IL&P is also planning to raise more capital for its loss-making Permanent TSB banking unit under the regulator’s new worst-case scenario for extreme losses.

The company has not yet been subjected to the same regulatory stress tests as the five institutions participating in Nama.

It may need to raise up to €950 million to boost Permanent TSB’s capital reserves before spinning it off from its profitable life business, Irish Life.

Some €750 million would be raised from tapping shareholders in a rights issue and €200 million through selling on the “in-force” business at Irish Life to investors in a securitisation deal. IL&P had previously said it would raise €600 million in a rights issue.

It has also emerged that senior IL&P executives, including chairwoman Gillian Bowler and chief executive Kevin Murphy, have made detailed statements to gardaí investigating the €7.45 billion in short-term loans to Anglo Irish Bank which flattered its balance sheet at the height of the banking crisis in September 2008.

An IL&P spokesman confirmed that the executives voluntarily made statements to detectives at the Garda Bureau of Fraud Investigation and were co-operating fully.