EBS expected to launch profit sharing scheme


THE EBS is expected to announce plans today to give members a share of its profits when it releases results for 1995.

Aimed at reinforcing its commitment to its mutual status, the EBS move follows action by building societies in Britain which have decided not to convert into banks. The decision by the EBS could come in the form of annual cash bonuses for members based on the profits earned by the society and/or improved terms for savers and discounts for long term mortgage holders.

In Britain societies are trying to counter pressures to convert to bank status by emphasising the benefits of mutuality through promising members an annual share of the profits of their societies.

A number of British societies which intend to retain their mutual status have launched profit sharing schemes for members. The moves come as some societies opt to convert to bank status, making large one off bonus payments to members when they float on the stock market.

In the Irish market, Irish Permanent took the conversion option, giving qualifying members 300 free shares worth £540 at the time of conversion and now worth £1,188. Some IP members with share and mortgage accounts qualified for 600 free shares.

Of the remaining mutual building societies, First National and Irish Nationwide have always said that they are considering all the options open to them. But the EBS has remained firmly committed to the concept of mutuality.

In Britain, the Bradford and Bingley building society announced a £50 million sterling profit sharing scheme for members which included reductions in mortgage rates for borrowers.

Nationwide, which is three times the size of Bradford and Bingley, has signalled plans to announce a £150 million profit sharing package for members in April. Its package is expected to involve lower mortgage rates for borrowers, better terms for savers and possibly annual cash distributions.

Last year the Yorkshire Building Society announced a £20 million bonus package for members, and more recently Britannia announced plans to pay out about; £35 million to members. Under the Britannia Loyalty Bonus Scheme, members with qualifying mortgage or investment accounts will get annual cash payments as well as discounts on mortgage rates.

Described by its chief executive, Mr John Heaps, as "a modernised approach to the mutuality: concept", Britannia members are to earn points each year depending on the size of their monthly mortgage payment, the amount they have invested in qualifying society accounts, and how long they have been with the society.

Britannia members who have been with the society for five to nine years will have their points' multiplied by 1.5. Members with the society for more than 10 years will have their points doubled and there will be bonus points for holding other society products such as pensions and house insurance.

At the end of each year the society will declare a value per point which will be related to the profits earned by the society that year.

EBS, which had reserves of £118 million at the end of 1994 and announced profits for the year of £21 million, is today expected to announce good profit growth for 1995.