INBS posts €2.5bn loss for 2009

Irish Nationwide Building Society recorded a €2.5 billion loss in 2009 as loan losses soared, exacerbated by the "failure"of its commerical lending strategy, it said today.

The bank said its provisions for impaired loans rose to €2.8 billion in the year to December 31st 2009, compared to €464 million in the previous year. The majority of the losses, some 96 per cent, related to commercial loans.

Chairman Danny Kitchen said the losses reflected "unprecedented levels" of impairment on its loan book.

"The collapse of property markets both in Ireland and abroad gave rise to the impairments but this was exacerbated by the nature of the operation of the business which was clearly a flawed model. The scale of the losses reflects the failure of the Society’s commercial lending strategy which was over reliant on asset value,” he said.

Operating income for 2009 rose from €260 million in 2008 to €374 million, with €287 million from the repurchase of Irish Nationwide's debt securities at a discount.

Net interest income fell substantially from €258 million in 2008 to to €109 million last year as borrowing costs rose.

The bank's administration expenses rose to €46 million from €45 million a year earlier, as the financial crisis led to non recurring expenses of €7 million in professional fees.

Chief executive Gerry McGinn said the greatest management challenges were in relation to the commercial loan portfolio.

"The society has manifestly been seriously under-resourced in many areas of its business activities and support functions, but most especially in commercial lending," he said.

"Given the predominance of property based lending in our portfolio, the lack of market activity in our primary markets in Ireland and the UK has not only affected the level of impairments, but it also has constrained our capability to generate solutions to realise value from these assets.”

Mr McGinn said there was a "fundamental change" in the way the Irish Nationwide Building Society is managed, and said robust corporate governance is now in place.

Commenting, Richard Bruton, Fine Gael’s finance spokesman, said the results showed Irish Nationwide Building Society had been managed in an appalling manner.

“Clearly, of all the financial institutions in Ireland being bailed out by taxpayers, Irish Nationwide exercised the least care in securing adequate security,” Mr Bruton said.