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EBS bosses entitled to a payoff after AIB merger

A NUMBER of key EBS executives are entitled to walk away from the building society with payoffs when its merger with AIB goes through, chief executive Fergus Murphy said yesterday.

The comments came after EBS revealed losses of €590m for 2010 as it took a €392m hit on loans transferred to Nama and booked additional losses on its mortgage book. In 2009 the society recorded a loss of €78.8m.

"It's a devastating result for the society," said Mr Murphy.

Mr Murphy said the building society was "working hard" with AIB on a plan to merge the two entities, following an announcement from the Government at the end of March.

"All going according to plan, we expect the merger to be completed by mid-summer," he said, adding that it was "likely" that EBS would incorporate some AIB products into its offering.

The EBS boss said details of how management would be split between the two entities had yet to be hammered out, but he admitted that "some" EBS executives had so-called 'change of control' clauses in their contracts.

These clauses typically allow executives to leave their jobs with a payoff if the ownership of their company changes hands.

Asked whether his contract included such a clause, Mr Murphy said he was "hopefully not planning to go anywhere".

Mr Murphy also stressed that the EBS brand would remain, echoing comments earlier in the week by AIB executive chairman David Hodgkinson.

EBS said it did not believe debt forgiveness would become a "formal structure" but finance boss Emer Finan said she expected that "in some cases there will be circumstances where we have to" write off portions of distressed borrowers' debts. It has "no immediate plan" to raise mortgage rates.

The lender said mortgage arrears were increasing but at "slower rate", with 8.4pc of residential mortgages now classed as "non-performing" compared to 5.2pc in 2009.

The EBS "core business" reported a profit in 2010 of €56m but total income for the year dropped €40.5m to €152.8m on the back of what EBS called "increased funding costs in retail and wholesale markets while one-off profits on the sale or repurchase of securities were down €25.7m. Net interest margin fell by nine basis points to 63bps for 2010".

EBS has about €100m of junior debt instruments and Mr Murphy said it was "likely" that the building society would "look at" inflicting losses on those.

Despite the suggestion that his firm will impose losses on junior debt holders, the building society boss said he believes that it is "in the best interests of Ireland" that senior bondholders, including those owed about €3.5bn by EBS, are repaid in full.

Company chairman Phillip Williamson described 2010 as "a year of huge economic change" for the country but added EBS was apparently looking forward to the merger with AIB.

They would be concentrating on "maintaining a clear focus on capital, liquidity, funding, regulatory compliance, prudent risk management and continuing to manage our cost base", he said.

Irish Independent