Nationwide may need €2bn for Nama losses

 

IRISH NATIONWIDE Building Society has said it may need up to €2 billion in additional capital to absorb losses incurred on the sale of €8.3 billion in loans to the National Asset Management Agency (Nama).

This could bring the potential bill facing the Government on the recapitalisation of the State’s two building societies, Irish Nationwide and EBS, to €2.4 billion.

It would bring the cost of bank recapitalisations to the taxpayer to €13.4 billion, with further capital injections likely at the nationalised Anglo Irish Bank, and potentially at AIB and Bank of Ireland.

Irish Nationwide said it would “require additional new capital in the range of approximately €1.2 billion to €2 billion” as a result of impairments on its Nama loans.

EBS said on Monday that it would need between €300 million and €400 million in additional capital to cover losses on the sale of about €1 billion in development and associated loans to Nama.

“The additional capital required and the amount to be transferred to Nama may vary significantly depending on how events unfold,” Irish Nationwide said.

The building society said it would hold a special general meeting of members on Friday, December 18th to seek approval to issue “special investment shares” to the Minister for Finance in return for a State capital injection.

“The purpose of the meeting is to obtain member support to allow capital which is essential for the society’s future to be provided by Government to Irish Nationwide,” the building society said.

EBS is holding its own special general meeting at the same time as Irish Nationwide to seek approval from members for a Government capital investment.

The EBS meeting will take place in the Burlington Hotel in Dublin at 11am, while Irish Nationwide’s meeting will be held at the same time in the RDS in Ballsbridge. EBS has 462,000 members and Irish Nationwide about 200,000.

Irish Nationwide said its board was “strongly recommending” that members vote to allow the capital injection, “which is essential for the society’s future”. It said it had posted a circular to members detailing the resolutions to be voted on at next week’s meeting.

Formal talks leading to a potential merger of EBS and Irish Nationwide began last month at the instigation of the Government.

The approval of a capital injection into the building societies is seen as a precursor to their potential merger, with the State likely to take a stake of between 80 and 90 per cent in the enlarged society.

Irish Nationwide has 50 branches nationwide, while EBS has 14, with 42 “tied” branch agents, similar to franchisees.

EBS has about 610 staff, while Irish Nationwide employs 400.

Irish Nationwide will be left with a loan book of about €2 billion after Nama, compared with a €16 billion loan book at the EBS.