Business Irish

Sunday 4 December 2016

Loss-making BoSI gets €2bn cash injection from parent

Joe Brennan

Published 18/01/2010 | 05:00

Joe Higgins: conducting review of the bank's Irish operations
Joe Higgins: conducting review of the bank's Irish operations

Lloyds Banking Group injected €2bn into its Bank of Scotland (Ireland) unit last month as it sought to buffer the loss-making Irish unit's balance sheet in advance of another massive bad loan impairment charge, the Irish Independent has learned.

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This brings to almost €3.5bn the amount the group, which is 43pc owned by the UK taxpayer, has pumped into BoSI over the space of 12 months to shore up its reserves. BoSI also trades under the Halifax brand in Ireland.

The new cash call uses up a significant amount of Lloyds' record-breaking £13.5bn (€15.2bn) 'rights issue' share sale in December as the group sought to fireproof its capital reserves and avoid participating in the 'asset protection scheme' -- the UK government's alternative to our 'bad-bank' plan.



Bailout

Filings with the Companies Office show that BoSI has filed a so-called "return of allotments" document, indicating that the bank has received another massive bailout from its parent. The document has yet to be scanned.

But the Irish Independent has been able to establish that the bank, which has been conducting a review of its Irish operations since last spring, received €2bn from Lloyds on December 17 -- just weeks before the end of its financial year.

A spokesperson for Lloyds said: "We continue to provide capital and funding support to Bank of Scotland (Ireland) as we would do in the normal course of business -- and on an ongoing basis."

The total €3.45bn BoSI has received to date equates to 10pc of its entire loan book. The bank was among the more aggressive property development lenders during the boom years.

The news comes hot on the heels of Ulster Bank receiving a €175m capital injection from its UK government-controlled parent Royal Bank of Scotland last month. That brought to €2.3bn the amount RBS has pumped into its Irish subsidiary over the course of a year -- equivalent to 4pc of its loan portfolio.

BoSI reported €1bn-plus of bad loan losses for the first half of last year, sending the group into a large loss for the period.

The group's new chief executive, Joe Higgins, who took over from Mark Duffy last April, was preparing to announce a significant retrenchment in the Irish market last July.

However, he told the group's 1,700 employees on the day the announcement was expected that a "significant development" prompted it to scrap the closely guarded outcome of the strategic review. It had been widely feared at the time that the bank was looking to shrink or close down its 44-branch Halifax retail network.

Unite, the bank's main union, has expressed its anger about the lack of communication from top management to staff on the review.

BoSI has indicated it would be keen to participate in government-driven consolidation of smaller-tier lenders. EBS and Irish Nationwide are in tie-up talks and Irish Life & Permanent hopes to hammer out a deal to merge its Permanent TSB unit this year with the combined building societies.

Irish Independent

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