Irish Nationwide has significantly cut its residential lending in recent weeks in advance of its expected trade sale, according to sources close to the building society. Simon Carswell, Finance Correspondent, reports.
New homeloans provided by the society have fallen dramatically due to a combination of factors, including more stringent lending criteria in response to the economic slowdown and the financial turmoil in the international markets.
A much higher proportion of residential loan applications have been declined by the building society in the second half of the year, compared to the first six months, sources said.
Irish Nationwide has less than 5 per cent of residential lending market.
The forthcoming sale has also played a factor in the reduced loan activity. A number of senior personnel who were previously involved in assessing new loan applications are working more closely with investment bank Goldman Sachs which has been hired to sell the society.
A spokesman for the Irish Nationwide said: "The lending targets for the year have been met and the society will be reporting another strong set of results for the year." He later added that the building society was "continuing to assess all loan applications in a prudent and cautious manner".
Icelandic bank Landsbanki is one of the frontrunners to buy Irish Nationwide. Others parties to have expressed an interest are US lender GE Money and German bank Hypo Real Estate. A consortium comprising Dublin private equity firm Quinlan Private and Bank of Scotland (Ireland) has also expressed an interest in looking at the building society.
First bids are expected in the coming weeks. Former Irish rugby international Hugo McNeill, a senior executive in Goldman Sachs, is playing a key role in the sale process and has approached interested parties in recent weeks.
The building society has enjoyed a bumper year in 2007 and is expected to add between €200 million and €300 million to its coffers this year. Pre-tax profits grew 34 per cent in 2006 to €237 million.
Irish Nationwide is expected to sell for between €1 billion and €1.5 billion, although sources close to the building society have said they now expect it to sell for closer to the lower end of that scale due to the 40 per cent fall in the value of Irish financial stocks since the start of the year.
The building society is one of a large number of financial institutions pursuing solicitors Michael Lynn and Thomas Byrne in the High Court to recover multi-million euro loans provided on the back of solicitors' undertakings. The building society is owed a little over €10 million by Mr Lynn and €10.5 million by Mr Byrne.
A large proportion of the society's loans to Mr Lynn are not secured. Irish Nationwide is one of three or possibly four financial institutions to provide loans on a single property owned by Mr Lynn - Glenlion House on Thormanby Road in Howth, Co Dublin, which has been put on the market.
The High Court heard on November 8th that the three known mortgages taken out on the house totalled an estimated value of about €12 million, while the house is worth €5 million. Irish Nationwide has been conducting a review of all loans provided on the back of solicitors' undertakings.
