Nationwide board did not consider wind-down option

IRISH NATIONWIDE’S board has not considered winding down the building society as an alternative to the Government taking a stake and a merger with rival EBS, the society’s chairman told members.

Members voted overwhelmingly at a special general meeting in Dublin to issue special investment shares to the Minister for Finance in return for a State capital injection of between €1.2 billion and €2 billion.

Chairman Danny Kitchen said this estimate on capital was “a guess” and that the society would not know its actual capital needs until the discount was set on the €8.3 billion of the society’s €10 billion loans moving to the National Asset Management Agency (Nama).

Mr Kitchen said the deterioration in the property market and work carried out by Irish Nationwide’s new management on re-evaluating the loans had led to the society taking substantial provisions against loans. This had created losses and the need for “a substantial capital injection”, he said.

“Realistically the only source of this capital is the Government.”

The board had considered “several alternatives to maintain the society’s business”, he said, but most could not be implemented. This had led to discussions with EBS to see if there was a “mutually acceptable basis” to merge.

Mr Kitchen said that the discussion were “at a formative stage”. Irish Nationwide had entered these talks with a view to ensuring that any merged entity would be “economically viable” and would “maximises the potential for the society’s management and staff”.

Responding to questions from members, Mr Kitchen said the potential shape of future consolidation in banking was “quite fluid”.

He declined to reveal the annual pay to board members, though Rory O’Ferrall, one of two Government directors on the board, said he was paid €40,000 a year and a further €10,000 for chairing one of the society’s committees.

Mr Kitchen said that the special investment shares would give the Minister “the power to do whatever he wants with the board” and de facto control of the society.

The Government would provide capital “on a drip-feed basis” as needed from the early part of next year until the Nama loans were moved, up to the end of June or “when it takes place”, he said.

Mr Kitchen said he hoped that the society’s former chief executive Michael Fingleton would repay the €1 million bonus he received last year, as he had agreed to, but added that there was “very little by way of legal redress” to force him to repay it.

One member, Michael Maughan, executive chairman of the Dublin-based Gowan Group, asked whether Mr Fingleton owned any of Irish Nationwide’s branches. “To the best of my knowledge, no,” said Mr Kitchen.

Brendan Burgess, a long-term critic of the society’s disastrous growth into development, asked whether the board had considered winding up the society which could leave a surplus for members.

Another member, Reggie Irwin, said Irish Nationwide was like Laurel and Hardy. It was a case of “this is a fine mess you got us into”, he said, but even Stan Laurel would not have been “so inept to get us into this position”.

He asked whether alternatives to a State investment had been considered, such as Irish Nationwide continuing as a tiny building society with a small staff, a voluntary board and a branch or two.

“We could ask Michael Fingleton to come back and rescue us,” said Mr Irwin, a veteran supporter of the former chief.

Accountant Mark Fitzpatrick asked the board “how could one man completely bring down this great institution”, which was “supposedly a working man’s society”.

“As a taxpayer, I cannot see how we are ever going to get €1 billion or €2 billion out of the society,” he said.