Irish Nationwide Building Society (INBS) told members at its annual meeting in Dublin today that it plans to reduce its commercial property loans to about 50 per cent of its overall loan book by 2013.
Danny Kitchen, chairman of the building society, said that Irish Nationwide, would try to “prudently expand its home mortgage business”. INBS is the second-largest customer-owned lender in the country,
Mr Kitchen said about 60 per cent of the commercial loans, which amounts to €8 billion of Irish Nationwide’s overall €10.4 billion loan book, was concentrated among the largest 100 customers.
The building society made a pretax loss of €280 million in 2008 after setting aside €464 million to cover bad loans, primarily on Irish Nationwide’s loans to the collapsing commercial property sector.
Mr Kitchen said that high concentration of loans among a small number of borrowers meant that the building society would make provisions for bad loans “in a much more specific way than perhaps would be possible in other organisations.”
“Consequently, the board feel that the provisions made do reflect a conservative approach, albeit certain assumptions have to be made in arriving at these figures,” he said.
Mr Kitchen criticised comments made in the media and politicians about the future of the building society, although he acknowledged that Irish Nationwide had made mistakes on its lending.
“Yes, undoubtedly mistakes were made but my own view is that we need to put this behind us and get down to sorting out the problems. Recrimination will solve nothing,” he told members.
He said that this year would be difficult and that it was impossible to predict an outcome for the year, given the uncertainty out there, but hoped Irish Nationwide would produce better results in 2009.
Mr Kitchen said that the building society had agreed to pay Irish Nationwide’s former chief executive Michael Fingleton a €1 million bonus last year “for the retention of his services” rather than for the building society’s performance in 2008.
r Fingleton, who retired at the end of last month, agreed to repay the bonus following mounting pressure over his receipt of €1 million in the aftermath of the Government guarantee scheme, which propped up Irish Nationwide and the other domestic financial institutions.
Mr Kitchen told members the payment of the bonus did not breach the guarantee scheme and this was confirmed by the opinion of a senior counsel, understood to be the former Minister for Justice Michael McDowell.
The Irish Nationwide chairman said that “a typographical error” was the reason for the building society stating its 2007 annual report that “members” – rather than a single member, Mr Fingleton – were the beneficiaries of a €27.6 million defined benefit pension scheme to which he made no contributions.
“A typographical error referred to ‘members’ when it should have been ‘member’, Mr Fingleton being the only member of that particular scheme,” said Mr Kitchen.
One member at the meeting claimed that this was a “deliberate attempt to deceive members”. “It was an honest mistake,” said Mr Kitchen who apologised for the error.