Wednesday 21 March 2018

Irish Nationwide wind-up among options in EU plan

Irish Nationwide: possible wind-up has been costed. Photo: PA
Irish Nationwide: possible wind-up has been costed. Photo: PA

Emmet Oliver

A WIND-UP of Irish Nationwide, which has already cost the taxpayer €2.7bn, has been costed and outlined in a plan submitted by the building society to the EU Commission.

The other option considered is a merger or sale to another institution and the transformation of the society into a fully fledged mortgage lender, which was its original purpose before it got into large scale commercial property lending during the boom.

It is understood the plan refers to the shortage of credit in the Irish economy and the chance that Irish Nationwide could supply loans into both the mortgage market and also the SME market.

The society’s branch network is an asset, says the submission, although it needs modernisation and upgrading. The Isle of Man, a key centre for deposits for the society, has been struggling, with recent credit downgrades not helping to attract customers.

It is possible the society will be forced to exit from all property plays it is involved as part of the restructuring process.

The building society was effectively nationalised in March, when the Government took a special investment share in the company, allowing the Department of Finance to control the society and decide its ultimate fate.

The society has been talking through the various options with the Department of Finance over the last few weeks and submitted its plan to the EU at lunchtime yesterday.

It is understood the society will have to jump a number of hurdles to avail of state aid and not be wound down. As the smallest of the guaranteed institutions it will have to prove it is of systemic importance to the Irish financial system.

With a large portion of its loans going into NAMA, the building society will be left with a much smaller balance sheet, making it more difficult to make this argument.

Ultimately assets with a book value of about €8.7bn will be sold to NAMA. About €670m have already been transferred, attracting a discount of 58pc, leading to a loss for the society on transfer of €137m.

The plan talks about the possible need for additional capital if the society wants to move in a fresh strategic direction.

Its chairman, Danny Kitchen, said earlier this year the society might need additional money depending on how severe the NAMA discounts are. Excess

Mr Kitchen said: “We have an excess of capital at the moment. Even a continued level of losses would not (require additional capital),” but he added that if future losses “exceeded a certain level” it would need additional cash.

Based on its balance sheet size, the building society would probably need several hundred million more, but the Government has not sanctioned anything beyond the €2.7bn so far.

Irish Independent

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