Sunday 17 December 2017

€195m bad loans lead to a record €99m loss for EBS

EBS chief Fergus Murphy has been in 'generic and embryonic' talks with private equity investors, and
is working to a timetable as the society must submit an EU state-aid restructuring plan by June
EBS chief Fergus Murphy has been in 'generic and embryonic' talks with private equity investors, and is working to a timetable as the society must submit an EU state-aid restructuring plan by June

Joe Brennan

EBS boss Fergus Murphy said yesterday that the building society was continuing to talk to private-equity investors as the group posted a €195m bad-loan charge last year, driving it into a record loss.

It reported a pre-tax loss of €99.3m -- two-and-a-half times the €38m shortfall it had recorded in 2008. The bad-loan charge consisted of €83.4m from its disastrous foray into property development in the boom; €86.4m related to home mortgages and €27.6m to commercial loans.

The Financial Regulator has directed EBS, which is transferring €900m of loans to the National Asset Management Agency, to raise €875m to reach new regulatory capital targets by the end of the year.

This is more than double the amount the mutual had figured that it needed.

The Government has committed to providing the capital but Mr Murphy and his finance director, Emer Finnan, have been in talks for some weeks with a group of private investors led by financiers Nigel McDermott and Nick Corcoran of Cardinal Asset Management.

Cardinal had been at the centre of the so-called Mallabraca consortium, which had previously circled Bank of Ireland and Anglo Irish Bank.

Mr Murphy described the current talks as "generic and embryonic" and said that they were working along a timetable.

He also confirmed that the financiers had outlined their potential backers, but refused to give other details, other than that it was being supported by foreign capital.

But Ms Finnan hinted that EBS would most likely have a firmer idea of an investment proposal by the time the society files an EU state-aid restructuring plan in June.

Scenarios

She said there were "a number of scenarios" which EBS would be outlining in the plan and that the group would "at that stage be describing whether investment could be private".

Mr Murphy said the recapitalisation options ranged from the State stumping up the necessary cash to private equity providing all the money -- or a hybrid of both.

But for the purposes of EBS's capital plan, which must be filed with the regulator today, it is working on the basis that all the cash will come from the taxpayer.

The chief executive highlighted that Europe really had the final say in any solution.

EBS confirmed that its merger talks with embattled rival Irish Nationwide, which began late last year, had been put on ice as each works through its restructuring plan for Brussels.

The society's executives have also toned down their view about the emergence of a so-called 'third force' in Irish banking through consolidation of the country's second-tier lenders.

However, Mr Murphy said: "EBS should be a strong part of whatever develops ... over the next 12 to 18 months, or even two years."

EBS's total income rose 12pc last year to €193.3m, flattered by a one-off €34m gain from a bond buyback programme.

Net interest income fell by €2m as the net interest margin -- the difference between the average rates at which it borrows and lends to customers -- dropped to 0.72pc from 0.77pc.

Almost €8m of fees relating to the Government guarantee scheme also chipped away at underlying income. Still, the society managed to recover €2.5m of the €16m Icelandic banking exposure it had written off the previous year.

It also shaved its administrative costs back to €82.2m from €90m.

Irish Independent

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