INBS reveals 2010 losses of €3.3bn

IRISH NATIONWIDE made “catastrophic losses” of €3.3 billion in 2010, its final full year as an independent institution before being merged with Anglo Irish Bank.

The lender said it was confident that it will not require further cash from the Government beyond the €5.4 billion already injected.

Gerry McGinn, chief executive of Irish Nationwide, said he was angered by the losses and saddened by the closure of the building society’s 49 branches.

Arrears of 90 days on Irish Nationwide’s €2 billion mortgages to be moved to Anglo stood at 27 per cent of the book, more than four times the industry average.

Mr McGinn described the mortgages as “a book with huge problems”. The loans were to self-employed and construction workers, and were neglected by former management, which focused on development lending.

Arrears on the society’s buy-to-let mortgages - a quarter of the book - were 42 per cent and, on home loans, 22 per cent.

The mortgages, along with €600 million in commercial property loans, will be moved to Anglo following the transfer of 708 loans of €8.9 billion to the National Asset Management Agency. Some 69 loans with a face value of €400 million still have to be transferred.

A discount of 64 per cent – six points higher than the average – had been applied to the loans by the State agency. Irish Nationwide’s Nama discounts were “worst in class”, said Mr McGinn.

The 2010 deficit compared with a loss of €2.5 billion for 2009.

John McGloughlin, chief financial officer of Irish Nationwide, said that there may be surplus capital of €500 million left with the merger of the lender with Anglo.

This depended on the results of the stress tests by consultants Blackrock Solutions for the Central Bank at the end of the month.

“I am very confident that with the level of reserves that we have taken there won’t be the necessity for the Government to write another cheque,” he said.

Asked if Irish Nationwide was one of the world’s worst banks, Mr McGloughlin said: “The write-offs are extraordinarily high.”

The building society had discussions with Nama about the haircuts applied to loans but did not expect the discounts to be reduced. “It tends to be Nama’s word is final,” said Mr McGinn.

Irish Nationwide continued to write to former chief executive Michael Fingleton seeking the return of the controversial €1 million bonus as he had promised but wasn’t hopeful of getting it back.

“I am not holding my breath,” said Mr McGinn. The lender didn’t receive a response to its last letter.

Asked how he thought the public felt about Mr Fingleton dining recently with Prince Albert of Monaco given the heavy losses at Irish Nationwide, Mr McGinn said: “I would have thought that the public would be outraged.”

The building society made a loss of €2.8 billion on discontinued operations, mostly Nama-related.

The loss on the continuing operations was €548 million after a bad debt charge of €504 million against loans of €2.6 billion.

Commercial loans accounted for €216 million of the charge, home loans €166 million and buy-to-let mortgages €121 million.

Irish Nationwide had €7.4 billion of loans from the European Central Bank at the end of 2010 but no such loans a year earlier. The next bond repayment of €600 million falls due in June 2012.

Mr McGinn said there would be some redundancies over the next two months offered to the remaining 217 staff. Employee numbers fell from 464 last year, with €3.6 billion in deposits sold to Irish Life and Permanent.

He is hopeful that senior managers will be appointed to the top team at the enlarged bank following the merger with Anglo.

“I do hope when they are designing the merged entity that they will be drawing on the expertise in our team,” said Mr McGinn.

He was paid €445,000 last year, and Mr McGloughlin €312,000. The chairman Danny Kitchen received fees of €144,000.

Mr Fingleton’s long-serving finance director Stan Purcell was paid €340,000 in 2010 for six-months of employment. This included €62,000 for lieu of notice and €98,000 for holiday pay.