THE HEAVY discount applied to loans transferring to the National Asset Management Agency (Nama) saw EBS report a record pretax loss of € 620.6 million for 2010. This was “a devastating result for the society”, Fergus Murphy, chief executive of the building society, said yesterday.
Without the loss incurred by the Nama transfer of loans, the society would have incurred a pretax loss of €228.2 million.
In what was a “very difficult year”, the society saw its losses increase significantly on the €78.8 million loss reported in 2009, due to a write-down of €392 million on the transfer of assets to Nama and impairment charges of €285 million on previously written down loans and financial assets. An operating profit of €56.4 million was achieved on core business, down 41 per cent from €95.6 million in 2009.
During 2010, EBS transferred five tranches of assets totalling €836.4 million to Nama, at an average haircut of 60.4 per cent. A further €65.6 million in commercial and associated assets is expected to transfer shortly. This will conclude the transfer of all of EBS’s land and development assets. However, according to Mr Murphy, Nama may yet seek the transfer of further loans.
The building society was also hit by a tough funding environment during 2010, and increased funding costs saw total income fall by 21 per cent to €152.8 million. Over one-quarter of the building society’s funding came from either the European Central Bank (ECB) or emergency liquidity assistance (ELA), up from 12 per cent in 2009.
However, looking ahead, Mr Murphy said he hoped that, in time, the pressure will alleviate as markets recognise the strength of recapitalised Irish institutions.
EBS’s net interest margin fell by nine basis points to 63 basis points for 2010, but this is expected to improve due to the increased lending charges imposed on the society’s standard variable rate mortgage holders.
As of the end of 2010, the building society had a core tier one ratio of 8.4 per cent but, in line with the most recent stress tests, this will increase to 22 per cent due to the injection of an additional €1.5 billion of capital, which will come from the State.
“A line has now been drawn under the financial crisis in terms of what it will cost,” Mr Murphy said.
Of the building society’s merger with AIB, Mr Murphy said it would be a three-month process, and should be completed by early mid-summer.
With 2,000 job losses on the cards at AIB, Mr Murphy said that he couldn’t “give any comfort” on the jobs outlook for the building society.
“We’re hopeful to preserve as many jobs as we possibly can,” he said, adding that no decision had yet been made on his own future or that of EBS’s management team in the newly merged institution.
