Saturday 3 December 2016

Nationwide bosses confident no more state funds required

Society chief expresses sadness as 'catastrophic' losses of €3.3bn are announced

Published 20/05/2011 | 05:00

IRISH Nationwide bosses are "very confident" the Government won't have to pump any more money into the embattled society, which yesterday reported "catastrophic" annual losses of €3.3bn.

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The proclamation came as Irish Nationwide chief Gerry McGinn expressed his "sadness" at the "tragedy" of the building society's demise, while finance boss John McGloughlin slammed the "totally flawed business model" behind the collapse.

The duo also revealed that a joint business plan drawn up by Anglo Irish Bank and Irish Nationwide envisages selling off Nationwide's €2bn mortgage book within five years.

And they admitted that while Nationwide continues to write to former chief executive Michael Fingleton for the return of his infamous €1m bonus they're not "holding their breath" for him to acquiesce.

Despite describing the 2010 losses as "catastrophic", Mr McGinn stressed that they were "in line with expectations".

The "unprecedented" 64pc discount applied to Nama-bound loans made Nationwide "worst in class" of the six participating institutions and accounted for €2.7bn of the building society's latest losses.

Mr McGloughlin confirmed that Nationwide had "been in discussion" with Nama around the harsh valuations applied to some loans. "It tends to be that Nama's word is final," Mr McGinn said, playing down the possibility of a revision to the numbers.

Another €500m of loan losses was taken on non-Nama loans, with commercial accounting for €216m, home-loans €166m and residential investment property €166m.

Mr McGinn admitted that the 2010 losses, coupled with the €2.5bn lost in 2009, were "obviously a very high percentage" of Nationwide's total loan book, which came in at €11.36bn at the end of 2009.

Asked why the losses had been so high, Mr McGinn cited the "aggressive growth strategy" pursued by his predecessors whose objective was to "sell the building society", coupled with the "extraordinary power" of former boss Michael Fingleton.

"The business model was totally flawed," Mr McGloughlin added.

The losses forced the State to commit €5.4bn to save Nationwide, some fear even more taxpayer support will have to be pledged when the Central Bank publishes the results of a Nationwide's latest stress tests next week.

Confident

"We have not yet got the results," said Mr McGloughlin. "But I am very confident that, with the level of impairments we have taken, there will not be a necessity for the Government to write another cheque."

Mr McGinn also said that it was "important" for the building society to "acknowledge and express our gratitude" at the taxpayer support it has been given.

Irish Nationwide is set to be merged with Anglo Irish Bank by the end of the year, paving the way for the duo's combined loan book to be wound down over a ten-year period.

Mr McGloughlin yesterday said that the merger could boost the combined entities' capital by about €500m, ultimately reducing the burden on the taxpayer by that amount.

Mr McGinn yesterday confirmed that the institutions' business plan, which is pending approval from Brussels, anticipates selling off Nationwide's €2bn mortgage book "by the fifth anniversary" of the merger. Key elements of the merger including the future management structure have yet to be resolved, but Mr McGinn said that Nationwide's top team don't have "change of control" clauses that would allow them walk away with a golden handshake after the merger.

Irish Independent

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