# Horror Loss at EBS?



## andycole (18 Nov 2008)

Hi - 

I read this article in Sunday's Independent - dated the 16th November.
Its an article written by Shane Ross. The direction of the piece is that there has been big losses incurred by the EBS and that this could mean the end of EBS's Mutality Status. 

_"A highly confidential presentation, prepared by top-dollar spinners Q4, reveals that the EBS recently incurred "a level of provisions and zero profit or loss which will come as a serious shock to stakeholders"._

This is the first that I have heard of this - has anyone else heard anything? If the information that Mr.Shane Ross has written about is true - would this affect the ability of the EBS to give out mortgages?

I'm hoping someone will be able to explain or cast some light on the information that is contained in this article. It's scary reading and will do nothing for people's confidence in the Irish Banking sector.

Andy


Reference: http://www.independent.ie/business/irish/horror-loss-at-ebs-may-force-sudden-buyout-1541380.html


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## ClubMan (18 Nov 2008)

Maybe if they didn't do their best to dissuade existing members from depositing cash with them they might be in better shape? 

Bear in mind that the article cited was written by _Shane Ross _who is hardly the most neutral or balanced of commentators on such issues.


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## Rigoletto (18 Nov 2008)

ClubMan said:


> Bear in mind that the article cited was written by _Shane Ross _who is hardly the most neutral or balanced of commentators on such issues.


 
exactly what i was thinking.


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## ubiquitous (18 Nov 2008)

ClubMan said:


> Maybe if they didn't do their best to dissuade existing members from depositing cash with them they might be in better shape?
> 
> Bear in mind that the article cited was written by _Shane Ross _who is hardly the most neutral or balanced of commentators on such issues.



But none of the main points of the article were denied by the EBS Chief Executive Mr. Murphy when he appeared on the Newstalk breakfast show yesterday morning to discuss the article's contents


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## ClubMan (18 Nov 2008)

ubiquitous said:


> But none of the main points of the article were denied by the EBS Chief Executive Mr. Murphy when he appeared on the Newstalk breakfast show yesterday morning to discuss the article's contents


Fair enough. I was not aware of this.


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## Brendan Burgess (18 Nov 2008)

The EBS primarily lends to people to buy their houses. They have very little exposure to anything else. 

They can make a small provision every year for the next few years and show profits.  Or else, they can get it all out of the way this year by making big provisions.  This would result in losses. 

I understood that the PR documents outlined the different ways of handling the different outcomes which may arise. I don't think that they predicted losses as such. But I did not see the documents. 

Brendan


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## Towger (18 Nov 2008)

andycole said:


> I am going to make contact with my local EBS Branch and see if I can get any assurances. I will shortly be taking out my first mortgage with EBS so as you can imagine this is not something that I want to hear about.


 
This brought a smile to my face, the staff at branch level are, how shall I but it. Very nice to deal with but.... 

I would not we worrying about your Mortgage, the worse that can happen is you won't get it, and this maybe a blessing in disguise. Even it you lose your deposit...


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## andycole (21 Nov 2008)

http://www.independent.ie/business/irish/ilp-in-takeover-talks-with-ebs-management-1548304.html

_"__Irish Life & Permanent__ is in preliminary takeover talks with EBS, which could result in the building society giving up its 73-year history of mutuality."_

Hi folks - 

Further to my earlier post with regard to the EBS story that appeared in last Sunday's Indepenent - I have read in today's Irish Independent that there are merger talks taking place between the EBS and Irish Life and Permanent?

If losses have occurred within the EBS then as was mentioned in the article by Shane Ross - one of the remedies outlined is the end of mutuality and its buy out by another banking institution? 
How do people feel about this story that is breaking today?
Why is the EBS management talking to the Irish Life and Permanent?
Personally I would prefer for the EBS to maintain it mutuality status.


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## VOR (21 Nov 2008)

In contrast, the Times says BOI are in talks with IL&P. It is all just speculation at the moment.

However, I feel that EBS and IL&P are a bitter "fit". For one thing EBS already sells Irish Life products. Also, neither bank has a huge exposure to development land so should be sustainable notwithstanding the resi mortgage book.
There is also the cultural aspect. IL&P would have a better understanding of a mututal society and is easier to swallow for members than the 2 big "bad" banks.

Also, BOI and IL&P would have 50% of the life assurance market if they merged. Whatever about steam-rolling over competition law for bank activities, taking such a stance in the competitive life assurance market could and should prove more difficult.


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## silvamuppet (21 Nov 2008)

VOR said:


> However, I feel that EBS and IL&P are a bitter "fit". For one thing EBS already sells Irish Life products.



Except for the fact one is public and the other is a mutual.
From a fundamentals point of view the EBS don't really need to merge with anyone although if they felt the need to be part of a bigger entity then Rabo might be the better fit. (as far as I am aware they are also a mutual?)
This option has been explored in the past and I think the current EBS CEO has links to Rabo so maybe he was originally chosen with that in mind?


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## andycole (21 Nov 2008)

Can I ask has anyone heard anything more in relation to the story written by Shane Ross and the "horror" loss at EBS? Was this a "what if scenario undertaken by the EBS?" or has the EBS incurred a large loss for 2008? 
The story does not seem to have taken off or commented upon in this week's newspapers or television - when is the next agm for EBS?


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## silvamuppet (21 Nov 2008)

Andy.
I wouldn't read too much into the Shane Ross article.
The good senator has had an axe to grind with the EBS for some time and takes any opportunity he can to have a dig at them.

One of these days Ross will write something positive about them and I'll probably fall off my stool in shock. The EBS are not in any real trouble at the moment. I think their only real exposure over the last year or so has been to dodgy solicitors rather than dodgy developers! (note they have taken a financial hit this year...not sure if it amounts to an actual loss though!!)

AGM won't be for another couple of months. (think it's usually late spring)


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## Murt10 (21 Nov 2008)

I suppose a couple of grand windfall for us members is out of the question.


Murt


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## silvamuppet (22 Nov 2008)

Murt10 said:


> I suppose a *couple of grand windfall* for us members is out of the question.


?? From what?
A demutualisation? This has been rehashed on this site many times. You wouldn't get anywhere near 4 figures if the EBS decided to demutualise. (and that was in the good times  ).


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## ontour (24 Nov 2008)

Apologies if I have missed this elsewhere.  Does the government have the power to automatically demutualise EBS or Irish Nationwide without the approval of the members?


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## andycole (25 Nov 2008)

That's an interesting question - I should think not! My thinking and also as a member of the EBS - is that it's the members who must vote firstly and then in favour of de - mutualisation? 
So if the majority of the members of the Building Society do not approve of demutalisation then that's it? How can the Government overcome this resistance - after all it belongs to the members and the money comes from these members, not the Government?
Hope I'm not wrong about this - because I would much prefer to see the EBS hold onto their mutual status.


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## silvamuppet (25 Nov 2008)

Well the Building societies act is here
http://www.irishstatutebook.ie/1989/en/act/pub/0017/index.html
I don't see anything in there from a quick enough glance at the more likely sections to suggest the government has the power to force them into anything.

I'd be amazed if as members it was anyone other than us that had the final say.
I also would favour the keeping of the mutual status.
Anything that is put before the members would have to be sufficiently palatable to get agreement.

Then again, a lot of people have this wildly optimistic view of demutualisation and the riches (not!) that it brings. I suspect that if the board ever put forward this option more than enough members would be falling all over themselves to vote in favour of it.


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## jpd (25 Nov 2008)

If the losses are such that the society is insolvent, then if the Gov't puts billions of € into it, then it will control the society and can do what it wants. 

Effectively, the members, and I am one, will have allowed the management to ruin the society and make it insolvent by imprudently managing the affairs - for example, by chasing a higher interest rates offered by the Icelandic banks, they have lost (probably) millions of members money.


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## silvamuppet (25 Nov 2008)

jpd said:


> If the losses are such that the society is insolvent,



Is that a hypothetical musing or do you actually think the EBS is in any danger of insolvency? To the best of my knowledge they don't rely on capital markets for their funding so they have no exposure to the current credit problems.

Their biggest problem over the last year or 2 was getting stung by one or 2 of those dodgy solicitors).

The EBS is a bread and butter building society that largely fund their lending with savings they take in. 

How and ever, I do notice that in the building societies act of 1989 that 
The Central Bank shall revoke a Building Society's authorisation if- 
a society has become or is likely to become unable to meet its obligations to its creditors and shareholders or suspends payments lawfully due by it.
(section 40, Paragraph 2 subsection e)

Potentially via that mechanism could the government supercede the members. 
Still though , it's pie in the sky. The only danger the EBS is in is from Shane Ross doing a Joe Duffy on it and senselessly whipping up the masses against it!


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## Sunny (25 Nov 2008)

silvamuppet said:


> Is that a hypothetical musing or do you actually think the EBS is in any danger of insolvency? To the best of my knowledge they don't rely on capital markets for their funding so they have no exposure to the current credit problems.
> 
> Their biggest problem over the last year or 2 was getting stung by one or 2 of those dodgy solicitors).
> 
> The EBS is a bread and butter building society that largely fund their lending with savings they take in.


 
I wouldn't be so blase about EBS. 11% of their loan book is in commercial real estate and a further 13% is in the buy to let market. As for their funding, only around 53% comes from customer deposits so they are reliant on capital markets.
Having said all that they are in a strong position with a Tier 1 ratio of 9%  but I think what Ross was pointing out was that there is more bad news coming down the line and the Society is obviously looking at options on how to deal with it.


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## silvamuppet (25 Nov 2008)

Sunny said:


> As for their funding, only around 53% comes from customer deposits so they are reliant on capital markets.



That low?? I thought their funding from savings was much higher than that!
In fairness that does give them a certain vulnerability to the problems in the credit markets at the moment.
I'd be more worried about that than I would be about the commercial and buy to let exposure.

The problem with Shane Ross is that while he is right to point out possible bad news, when it comes to the EBS he tends to wrap it up in his own brand of almost Joe Duffy like sensationalism. I find i have to take what he has to say with a significant dollop of salt!


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## ubiquitous (25 Nov 2008)

silvamuppet said:


> The problem with Shane Ross is that while he is right to point out possible bad news, when it comes to the EBS he tends to wrap it up in his own brand of almost Joe Duffy like sensationalism. I find i have to take what he has to say with a significant dollop of salt!



You are entitled to your opinion, but its worth noting that Ross' investigative journalism has been spectacularly vindicated once again this week, this time in relation to Fás. 

Maybe I'm too young to remember Joe Duffy's work as an investigative journalist


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## Bobby1 (25 Nov 2008)

Shane Ross is taking full advantage of the current financial climate to up his attack on the EBS. His 'mole' as he puts it in his articles in the paper is feeding him information about EBS from the inside and Ross brags about how he keeps getting one up on the management by publishing private and confidential documents! I would not called that investigative journalism, I would call it reckless!

All Banks and not just EBS are in the same boat-trying to ride out the storm and see what happens- having Ross write explosive articles about 1 financial institution is not helping matters in the bigger picture. 

Ive no connection to EBS BTW- For the record I think that the board have made many stupid mistakes but no more then the likes of AIB, NIB and Irish Nationwide B.S.

I would be in favor of EBS staying mutual- I think we should have at least 1 left- be good for competition wouldn't it?


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## Bronte (26 Nov 2008)

Shane Ross, like him or loath him, has for years been writing about the corrupt practices and behaviour that goes on in state institutions etc.  How right he's been proved again and again.  EBS and Fas = QED.  I don't care how he gets his information, as least we are getting it from someone, no one else is doing anything about the breathtaking arrogance, sense of entitlement, massive salaries, dismal performance of these organisations.  EBS's first priority is the position of the board, how quaint,  it's not the staff, shareholders and pesky customers as so correctly pointed out by one Shane Ross.  One can only imagine what is really going on as however good Shane's sources are he's probably only getting limited information.  Please keep it up as some of us actually want to be fully informed and don't want just false insider rosy pictures that are soley designed to fool the public.


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## Raskolnikov (26 Nov 2008)

Bobby1 said:


> I would not called that investigative journalism, I would call it reckless!


Why would you call it reckless? EBS (and INBS for that matter) is supposedly run for the benefit of its members. All Shane Ross has done is exposed how management are simply feathering their own nests while making some dubious decisions regarding the businss.


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## ubiquitous (26 Nov 2008)

Bobby1 said:


> All Banks and not just EBS are in the same boat-trying to ride out the storm and see what happens- having Ross write explosive articles about 1 financial institution is not helping matters in the bigger picture.



I don't know where you got the idea that the EBS if the only financial institution that Ross has questioned in recent times. In this month alone he has also strongly criticised the dismal performance of Brian Goggins at BoI, and more power to him.


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## ontour (26 Nov 2008)

ubiquitous said:


> I don't know where you got the idea that the EBS if the only financial institution that Ross has questioned in recent times. In this month alone he has also strongly criticised the dismal performance of Brian Goggins at BoI, and more power to him.


 
Shane Ross's 'investigations' into the Irish banks is heavily weighted towards EBS.  If he has a mole on the inside of EBS, then it makes for a very easy investigative effort on his part, but it does not make it balanced.

As a prominent media figure, he has the ability to put a spin on any leaked information.  As it is perception rather than reality that drives public reaction, he tells the public how to interpret the leaked materials, the react and lo and behold he is 'vindicated'. 

From the material that he has published, I am shocked as it appears that the situation in EBS is very bad and that they have limited ability to absorb the losses.  The fact that they have examined other options and brought in the PR consultants should not be seen as a negative.  Competant management should be analysing alternatives and in the current climate being very careful of public communications.


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## ubiquitous (26 Nov 2008)

ontour said:


> From the material that he has published, I am shocked as it appears that the situation in EBS is very bad and that they have limited ability to absorb the losses.



So would you have been happier had this story been suppressed.


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## andycole (26 Nov 2008)

So would you have been happier had this story been suppressed?

ubiquitous - I think the issue or concerns that many members of the EBS may have with the Shane Ross report - is firstly as has been suggested this report may well be just a "What IF" look, - secondly I would prefer if he could clarify if this is indeed the case with the EBS Management.
Now here is where his problem lies - does he have any offical contacts with the EBS Management? Will anyone take the time to talk to Shane Ross and clarify the situation? If not why not? I know of other business reporters in newspapers will have comments from the management concerned that are connected to the stories that they are publishing. 
Shane Ross does not seem to have developed any relationships with anyone within the business community? Does he do interview pieces with people - or is his work entirely statistical focused?

For this type of story I would prefer an approach taken whereby an effort was made to engage with the EBS Management. A lot of people are very worried to read about a forthcoming "horror" loss at the EBS - and if Shane Ross cannot get access to EBS Management then I would prefer the Irish Indepenedent to place another news reporter/journalist on this story who may be able to get access to the EBS Management.


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## ontour (26 Nov 2008)

ubiquitous said:


> So would you have been happier had this story been suppressed.


 
I would prefer if all of the financial institution explained to their members or shareholders what their current situation is, however this being idealistic rather than pragmatic. If you went in to school without your homework done and you knew that there were lots of others without their homework done, would you stand up and confess first or wait to see if someone else gets caught and what happens to them? Sure from a distance, yesterdays homework looks sort of like today's and the number one priority is to survive until tomorrow !


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## ubiquitous (26 Nov 2008)

andycole said:


> For this type of story I would prefer an approach taken whereby an effort was made to engage with the EBS Management. A lot of people are very worried to read about a forthcoming "horror" loss at the EBS - and if Shane Ross cannot get access to EBS Management then I would prefer the Irish Indepenedent to place another news reporter/journalist on this story who may be able to get access to the EBS Management.



To be honest, I can't see what your problem is.

Ross published a story about the EBS - one that, as you say, one that worried many people. 

The EBS chief executive, Mr Murphy, verified the story the following day on Newstalk.

Are you now saying that both Ross and Murphy are wrong?


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## andycole (26 Nov 2008)

Hi - 

I thought that the Chief Executive Mr. Murphy said the story was based on a "what if" scenario on Newstalk? However I did not hear the interview myself - so I am only saying this on what I read second hand.
I forgot about that this interview had taken place on the radio. I gues what I am saying is I want to see the EBS Management become more engaged in the media with this story - and to fully explain what the present financial position of the EBS is. 

Also why has this story not really being taken up by the other newspapers?

Ross has been backed up with his story about FAS - the facts here have spoken for themselves.


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## Guest106 (26 Nov 2008)

Oh but they will, they will.  The other media  outlets are just hanging cute to see if there's any refutation and when they see there's none they will get going then with their various slants.  Plus they don't have access to the 'inside' story.


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## jpd (27 Nov 2008)

1John said:


> ...  Plus they don't have access to the 'inside' story.



You mean they weren't bothered to try and find out. Investigative journalism isn't the forte of the Irish press corps.


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## Bronte (28 Nov 2008)

andycole said:


> Also why has this story not really being taken up by the other newspapers?


  Papers are afraid of being sued.  Why hasn't the EBS stated that what Shane Ross wrote is untrue?  Maybe it's because it is true.  I don't see the EBS putting out a statement refuting what he wrote which would automatically lead to the assumption that what he wrote it correct.  These are the questions you should be asking yourself.  You can 'download' pod casts so that you can hear the interview if you want.  I didn't hear it.  

Ontour - I don't get your homework analogy.  The EBS has a duty to disclose the truth to it's shareholders surely?


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## ClubMan (2 Dec 2008)

Bronte said:


> The EBS has a duty to disclose the truth to it's shareholders surely?


I presume you mean "members"?


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## Bronte (2 Dec 2008)

ClubMan said:


> I presume you mean "members"?


 I stand corrected, it is a mutual society after all.


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