IRISH NATIONWIDE Building Society has reported an after-tax loss of €243 million for 2008 after setting aside €464 million to cover loan losses – a 10-fold increase on the previous year. This compares with an after-tax profit of €309 million in 2007.
The bad debt charge amounts to 4.4 per cent of the loan book at the end of last year, an increase from 0.39 per cent a year earlier.
The building society said in a statement that the large increase in loan loss provisions reflected “the deterioration in economic conditions across its markets”.
The lender has a heavy exposure to property development and investment in Ireland and the UK.
The building society said it reduced its loan book by 15 per cent to €10.4 billion in 2008, but that of this, €1.4 billion was due to the decline in the value of sterling.
Total assets fell to €14.4 billion from €16 billion as a result.
Irish Nationwide lost €490 million in customer deposits last year.
The building society said “customer accounts” stood at €6.7 billion or 65 per cent of loans at the end of 2008 compared with 59 per cent, or €7.2 billion, a year earlier.
Despite the reduction in the loan book, commercial loans remained at about 80 per cent of overall loans at the end of 2008.
The building society made operating profits of €260 million before bad debts.
Fee income fell by €134 million and net interest income by €39 million.
The society said that this year would “continue to be a difficult year for the Irish economy and the markets in which we operate”.
“The society’s ability to remain as a going concern and achieve its business plan is dependent on the continuation of Government support,” the building society said.
“As a systemically important institution, Irish Nationwide was included in the guarantee scheme.
“The Irish Government is committed to ensuring the continued viability and stability of systemically important credit institutions.”
The building society said that with reserves of €1.2 billion and continuing Government support, the institution can achieve the objectives in its business plan “to continue as a viable and systematically important credit institution”.
The business plan “seeks to stabilise the society in the current difficult financial climate”, according to the building society.
Irish Nationwide said that when the financial environment im- proves, the institution planned to restart its sale process “to release maximum value for members”.
The building society cancelled its sale process last May due to the sharp fall in financial stocks amid the global banking crisis, saying that it could be up to two years before the market improved.
Irish Nationwide said that it has €2.23 billion of debt funding maturing in 2009 and plans to repay this through the reduction of its loan book, selling its loans on to investors in securitisation deals and selling new loan notes.
“The ability of the society to raise funds in the market will depend to a large extent on the state of the global markets at that time,” the building society said.
Irish Nationwide said its ability to raise funding “on a continuing basis” depended on the State bank guarantee, which, the building society said, is costing the lender about €20 million a year.
It raised €750 million and £500 million in debt securities last year and a further £325 million (€372 million) in funding maturing in September 2010 under the bank guarantee.
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