EBS profits jump as it sets aside €55m for tracker redress

AIB subsidiary EBS generated a pretax profit of €223 million last year, up 50 per cent compared to the €148 million recorded in 2014.

The former Educational Building Society, which merged with AIB five years ago, attributed the rise in profitability to a release of provisions for impaired loans, higher net interest and other operating income.

Recently-filed accounts show EBS made a €55 million provision relating to the Central Bank of Ireland’s sector-wide redress programme for tracker mortgage customers. It also set aside a further €38 million for related costs and losses arising from revised rates.

The group’s parent announced in March it had set aside €105million for the rogramme, which included EBS’s contribution. AIB also recognised a provision of €85 million for related costs at that time.

EBS was a standalone building society until July 2011 when it was acquired by AIB for €1 following a decision by the State to merge the pair into a pillar bank. The finanical institution received a €2.375 billion bailout after the economic crash.

It is now a standalone, separately branded subsidiary of AIB, with 71 branches and a direct telephone-based distribution division. It offers mortgages and savings products to consumers and had consolidated total assets of €13 billion at the end of 2015.

EBS has not issued any new commerical property lending since 2008, except for the purpose of loss mitigation.

The group said there was an overall provision writeback for 2015 of €89 million versus a loan impairment provision charge of €28 million a year earlier.

EBS said total residential impaired loans amounted to €2.5 billion last year, as against €3.2 billion in the preceding year.

At the end of December, the group’s mortgage portfolio before impairments stood at €12.6 billion, of which €12.4 billion was for residential loans. This marks a decline versus 2014 when EBS’s mortage portfolio before impairments totalled €12.9 billion. The instituion attributed the fall in mortgage balances to customer payments and write-offs exceeding new lending during the financial year.

New residential lending totalled €603 million last year, up from €480 a year despite EBS’s share of the new residential lending sector staying relatively unchanged at 12.4 per cent. It total share of outstanding Irish retail mortgage balances is approximately 11.2 per cent, down from 11.5 per cent a year earlier.

EBS said mortgage restructuring solutions were in place on about 18,000 accounts at the end of December with balances of €2.2 billion.

Net interest income for the year totalled €254 million, up 5 per cent or €11 million on the €234 million on the previous year.

EBS’s net interest margin, the difference between the average rates at which it funds itself and lends on to customers, rose to 1.90 per cent from 1.75 per cent in the full year to December, mainly as a result of a decrease in retail funding costs.

The institution said total operating expenses jumped by €84 million to €178 million last year due primarily to increased administration expenses.

Total provisions held at the end of December amounted to €1.03 billion, equivalent to 8.2 per cent of total loans and advances customers.

Retail balances totalled €5.8 billion in 2015 and represented 83 per cent of customer funding.

“The capital position of EBS Group is stable due to continued profitability and the ongoing commitment of support from AIB Group. EBS is sufficiently capatalised to meet its regulatory requirements,” a note from the institution said.