THE €2 billion in residential mortgages remaining at Irish Nationwide must be run down or sold off within five years under the restructuring plans to merge the building society into Anglo Irish Bank and close both lenders down.
The two institutions took another step yesterday in their wind-down as Minister for Finance Michael Noonan directed them to implement plans they submitted at the end of last month.
This will now trigger the beginning of the operation to merge the two lenders and close them.
Irish Nationwide’s €2 billion in residential loans and rump of commercial property loans will be merged with €35.8 billion of loans at Anglo left after the transfer of €35.6 billion of loans to the National Asset Management Agency.
The rationalisation plans, based on a joint restructuring plan submitted to the European Commission last January, involve the working out of loans over 10 years.
The commercial property loans will be run down over a period of 10 years, though Irish Nationwide’s residential mortgages must be sold or run down in five years.
A large part of the Irish Nationwide residential mortgage book is expected to reduce in size due to regular loan repayments.
Under the plan, any remaining residential mortgages must be disposed of by the fifth anniversary of the restructuring plan. The aim of the gradual downsizing of the mortgage book will be to avoid a further capital loss from a fire sale.
The Irish Nationwide residential mortgages, amounting to about 16,000 loans, are among the worst performing in the Irish banking sector. A large proportion of them were provided to workers in construction and related sectors – the parts of the workforce most affected by the recession.
Anglo has plans to sell, refinance or run down about 10 per cent of its loan book – about €3.5 billion of loans – every year over the bank’s wind-down period.
About 250 jobs will transfer from Irish Nationwide to Anglo under the plan, bringing total jobs at the merged entity to 1,250. The plan involves a reduction in the combined workforce to below 1,000 by the end of this year.
Anglo chief financial officer Maarten van Eden told The Irish Times last month it would take “a couple of months” to merge Irish Nationwide with the bank after the Minister’s approval of the plan.
Anglo and Irish Nationwide submitted plans on the rationalisation of the two institutions to the National Treasury Management Agency (NTMA) on March 31st.
The plans were approved by the Minister last Friday under the Credit Institutions (Stabilisation) Act, the emergency banking Bill introduced last December.
Among the proposals were plans to dispose of Anglo’s wealth management business and the closure of its overseas offices in Jersey, Vienna and Düsseldorf.
UK corporate finance firm Hawkpoint has been hired to sell the wealth management division.
Anglo said it had been asked to draw up and implement, with Irish Nationwide and the NTMA, “a high level restructuring document” based on the restructuring plan submitted to the commission.
