IRISH NATIONWIDE is bolstering the management team in its UK division as the customer-owned lender carries out a wide-ranging review of mounting losses across its €10 billion loan book.
The building society has hired four senior staff at its Belfast office to manage the UK loan book.
They will work under a new head of the UK business, who will be appointed shortly to work at the London office. The society also intends to appoint a number of credit analysts to carry out detailed assessment of the loans.
The new recruits will take a particular focus on the UK loans moving into the National Asset Management Agency (Nama).
Irish Nationwide chief executive Gerry McGinn has moved to beef up the building society’s UK and Irish commercial banking teams since joining in June. Mr McGinn succeeded Michael Fingleton after he stepped down over his controversial €1 million bonus. Under Mr Fingleton, Irish Nationwide’s €4.4 billion UK loan book was managed by just two senior executives, one based in Belfast. The other, Mr Fingleton’s son, Michael jnr, works in the London office.
Irish Nationwide is expected to need capital of at least €1 billion and possibly in the region of €1.5 billion after this year’s bad debt charge and incurring losses on €8.3 billion in loans to be transferred to Nama, according to sources with knowledge of the impairments within the lender.
The building society has been carrying out a review of its loans over the past seven weeks and will continue this process with a view to determining loan losses for the year before the lender’s accounts are signed off by the auditors.
The loan losses within commercial property and development loans heading into Nama are receiving more detailed attention.
The losses are understood to be particularly severe due to the high loan-to-value ratio lending and profit share deals on the UK development loans agreed during Mr Fingleton’s tenure when Irish Nationwide arranged to share in any upside on certain projects.
The commercial banking team has been enlarged with several new managers. The latest, former Ulster Bank executive Declan Buckley, started last Monday as head of commercial banking.
Loan losses for 2009 have yet to be determined but are expected to exceed the €464 million set aside for bad debts for the previous year.
Irish Nationwide and EBS confirmed yesterday that they had started discussions on a potential merger of the two organisations.
EBS said in a statement that “it had agreed to engage in merger discussions in the best interests of its members, stakeholders and the wider financial services sector”.
“Any such initiative would be subject to the approval of the Financial Regulator,” each society said in separate statements.
Irish Nationwide said Mr McGinn met his counterpart at EBS, Fergus Murphy, on Wednesday “to open formal discussion” following contact between Irish Nationwide’s chairman Danny Kitchen and Philip Williamson, chairman of EBS.
Contact has also been made between the advisers on both sides and a timetable on talks will be agreed over the coming days.
Investment bank Goldman Sachs is advising Irish Nationwide, while the corporate finance divisions of NCB Stockbrokers and accountants KPMG are providing financial advice to the EBS.
Mr McGinn and Mr Murphy also met on Tuesday following comments by Minister for Finance Brian Lenihan on Monday that Irish Nationwide had expressed an interest in discussions with EBS.
Speaking at a conference attended by the Minister on Monday, Mr Murphy said a deal could be agreed before Christmas. Mr Lenihan said the State “may well end up being a substantial stakeholder in any resulting building society”.
