# Irish Nationwide loses  €2.5 bn in 2009



## Brendan Burgess (19 Apr 2010)

The Irish Nationwide released its results today



RTE clips [broken link removed]

These are quotes from Emma McNamara's report of what they said: 

It wrote off a further €2.8 bn in loans[ out of a loan book of around €10 bn.]

Resulting in losses of €2.5 bn. 

85 % of its commercial loans are going to NAMA. 

The discount on loans will be 58% - the highest of all lenders.

"massive Gaps in the paper trail on most of their loans" so they won't be able to enforce a lot of the security.

Talks with EBS are only at the preliminary stage. 

   There is a building society business which could be viable. They don’t know if there is a viable business 

They are reviewing all the options including wind down, merger, whether there is a viable business to save at all.


----------



## Brendan Burgess (19 Apr 2010)

I can't see how there can be a viable business. 

The loan book was €10 bn at the end of 2008. It must be down to around €2bn now mainly in residential loans. 

Hopefully the EU will insist on closing it down.


----------



## Bobby1 (19 Apr 2010)

Even though they are covered under the ELG Scheme and are offering the best deposit rates around I could never bring myself to do business with them or Anglo. I like most people Im sure look upon these 2 insitutions as the biggest discrace to the Irish Banking Sector- now Im sure present management are trying their best, but when I see people willing to do business with the very insitutions that almost brought the banking sector to total ruin it really gets me, espically when no one would really have a positive word to say about them.

I can understand people wanting to get the most from their deposits, but when other insitutions who were not as bad (PTSB, EBS etc...) are offering quote competitive rates, there should be no need to go near these discraceful banks!

My morals would not allow me do bank with them... dont mean to offend anyone who does bank with them...


----------



## DerKaiser (19 Apr 2010)

Brendan Burgess said:


> Hopefully the EU will insist on closing it down.



Any way of avoiding getting burnt on this one as well?

Is it a simple case that the depositors/members are all expected to take out their cash by September 2010 and the state has guaranteed all of that money?

Is it slightly less palatable because building society depositors are more akin to shareholders?


----------



## Brendan Burgess (19 Apr 2010)

I think that the same issues apply.

Announce that the guarantee will not be continued beyond 2010.
Depositors withdraw their money.
The state puts in money to make up the shortfall. 
The state and some bondholders lose their money. 

It's possible that there might be some people who have put money on deposit with Irish Nationwide which matures after the current guarantee expires. But could you imagine the Joe Duffy show if some poor innocent deposit holders lost their deposits?


----------



## kaplan (20 Apr 2010)

The deposit guarantee scheme does not expire next September - retail deposits including share accounts will continue to be protected up to 100k. 

Brendan, you once said that the limit of 90% max €20k was sufficient - do you still hold this contrarian view?

K


----------



## Duke of Marmalade (20 Apr 2010)

A few comments. Firstly a disclosure - I am a member of INBS (_Bobby_ I will address the morals of that later).

Got their Accounts this morning. Yep, Loans to Customers down from 10.5Bn to 2.4Bn. Also 2.2Bn in liquid assets, 5.7Bn due from NAMA and 2.7Bn promissory notes, bits and bobs with a grand total assets of 13.3Bn. General Reserves have gone from 1Bn positive to 1.5Bn negative but the "equity" of the Society is positive 1.2Bn after that 2.7Bn State contribution.

Let us make a clear distinction between "winding down" and liquidation. When I heard on RTE this morning that "winding down" was on the radar screen I nearly panicked and thought of packing a tent and high tailing it to my INBS branch. Because a liquidation would be no fun at all. Could wait for years for that guarantee to be honoured.

But there is no question of liquidation as the Society is amply solvent after that State injection, in fact it has quality assets and a substantial cushion to enable it to honour all its debts even without a State guarantee. INBS is in fact probably the best little outfit in town, I would trust it without the guarantee before some of the others. That is because INBS has really very little left of risky assets to lose, the vast majority of its assets are high quality. Other banks on the other hand still have considerable exposure to the economy.

"Winding down" is a different thing, that means closing it to new business. Ironically because INBS is now so strong as a result of State support, the EU might insist on its being closed down.

Now for the morals behind my greedy exploitation of the Bank guarantee. I never for once regarded that I was lending to INBS, wouldn't touch them with a 40 foot. So far as I was concerned I was lending to the State and presumably the State would have been in a more precarious position if there hadn't been the likes of me prepared to accept their guarantee at face value.


----------



## Brendan Burgess (12 May 2010)

Duke of Marmalade said:


> INBS is in fact probably the best little outfit in town, I would trust it without the guarantee before some of the others. That is because INBS has really very little left of risky assets to lose, the vast majority of its assets are high quality. Other banks on the other hand still have considerable exposure to the economy.
> 
> .



Hi Duke

Sorry, I missed this contribution from you at the time. I have to disagree with you,particularly in light of today's AGM.

They have a figure of €5.7 billion in the balance sheet described as "Financial Assets held for sale to NAMA" . If you look at note 17 to the accounts, this turns out to be loans with a book value of €8.7billion with a 33% estimated hair cut as of 31 December 2009. The Chairman acknowledged today that there would be further losses. 

If we assume that the €8.7billion will be reduced by a further 20% to give a 53% haircut, then the €5.7 billion is really only worth around €4 billion. 

This will effectively wipe out the €1.4 billion reserves that are reported in the balance sheet. 

Of course, if the average haircut is higher than 53%... then the government has to put in more money. 

The subordinated liabilities are "only" €184 million, so there is no scope for the government to burn the bondholders. 

Brendan


----------



## Duke of Marmalade (12 May 2010)

Point taken _Boss._ The Summary Financial Statements sent to punters doesn't properly spell out the true NAMA position.  It is a point though that because it was so steeped in dud development loans, that once these are cleansed the assets that are left are relatively safe.


----------



## Brendan Burgess (12 May 2010)

I made that point today that the €2.4 billion in loans which they are keeping are fairly good. But it's their estimate of €5.7 billion for what they will get for NAMA which looks suspect. 

Brendan


----------



## Attica (12 May 2010)

I was at the AGM today (and impressed by Brendan's questions to Board and auditors) but not impressed at all by a Board which a) didn't try to have an election of Directors - all 5 going forward were automatically elected; and b) didn't try to change their auditors - the selfsame ones who have been there since 1974! I asked a question - what proportion of the 5.7b loans are paying interest now? The board claimed to have dedicated a full team to Nama and to these loans and yet were unable to answer that simple question, which should have been the foremost objective of their business. You lend, you get interest...No?


----------



## Brendan Burgess (12 May 2010)

Hi Attica

the answer to your question was quite interesting though. 

The Chairman (or was it the FD?) said that around 60% of the total loan book was on interest and capital moratorium. If 80% was commercial loans, then that is 60/80 or around 75% of commercial loans were on an interest roll up basis. So, the bit going to NAMA would be even higher. 

Brendan


----------

