Nationwide says €2.7bn bailout may need top-up
Society's chairman admits it could need extra state injection of cash
Irish Nationwide chairman Danny Kitchen addresses members at the society's AGM in the RDS yesterday. Photo: Frank McGrath
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Irish Nationwide's chairman warned yesterday the society may need more than the €2.7bn of capital the State is injecting into it if its future losses turn out to be higher than expected.
Speaking on the sidelines of the society's annual general meeting, Danny Kitchen also said a merger with EBS would be unlikely to get the go-ahead from Brussels, which must look over restructuring plans for both bailed-out groups.
The Financial Regulator revealed at the end of March that Irish Nationwide would need a €2.7bn capital injection.
This figure based on the 58pc haircut applied to the first batch of loans the society is sending into NAMA being extended across the €8.5bn portfolio that it will eventually transfer to the state 'bad bank'.
Mr Kitchen refused to speculate as to how much additional money the Government might need to pump into Irish Nationwide, which reported a record €2.5bn loss, after setting aside almost €2.8bn to cover loan losses.
"We have an excess of capital at the moment. Even a continued level of losses would not (require additional capital)," he said, but added that if future losses "exceeded a certain level" it would need additional cash.
Irish Nationwide is looking at three key options in its EU state-aid restructuring plan, which is due to be filed at the end of June. These include costing a complete wind-down of the society, a potential merger with a rival, or the possibility of the society standing on its own two feet in future.
Mr Kitchen told reporters that the only chance taxpayers had of recouping any of the capital they had pumped into Irish Nationwide was if it could develop a profitable business out of the deeply troubled institution.
"There's going to be a dearth of supply (of credit) in the Irish market. I do think there's a gap, that there'll be a question of whether we could exploit that gap," he said.
Mr Kitchen warned that losses would ratchet higher in the event it was put into wind- down. "Debtors would just head for the hills," he said. "These are the facts."
He also played down the prospects of the EU giving it the go-ahead for a merger with EBS. Talks between both have been put on ice in recent months.
The European Commission would be unlikely to deliver its verdict on the society's plan before the end of this year, according to the society's chief executive Gerry McGinn.
- Joe Brennan
Irish Independent
