EBS hands back €20m to customers

THE EBS had good news for its customers yesterday when it said it handed back over €20 million last year in the form of lower borrowing and higher deposit rates.

But it warned bank customers they were throwing away almost €120 million each year by paying higher mortgage rates than they needed to.

The society, which operates on a different basis from plcs in that its activities aim to maximise the benefits for its customers, yesterday reported a strong performance for the year to December, with new lending up 26% and savings inflows almost three times the previous year’s level.

The EBS delivered underlying profits of €76.6 million, a 7% increase, but handed back €20.5 million to customers in the form of a so-called “mutuality dividend,” which allowed it to cut lending rates and bump up the interest earned in savings accounts. The society paid out €8.5 million in this way in 2003 but beat its original aim of improving this to €18.5m last year.

EBS chief executive Ted McGovern said it was not a bank and consequently not in the business of maximising short-term profits. “Our unique commitment to mutuality now sets us apart from all other financial institutions in Ireland,” he said.

Customers of other institutions pay more on borrowings because their interest needs to cover the bank’s cost of funding, as well as deliver profits for the bank’s shareholders. But a mutual society does not face the same requirement and can charge less on borrowings.

“Based on feedback from our members, we know our EBS mutual strategy is now working well,” said Mr McGovern. The society’s focus was on delivering value to its 400,000 members by offering more competitive products while earning enough money to ensure its financial stability and invest in the business, he said.

EBS mortgage customers were the big winners during the year. The society changed its pricing policy in favour of an approach that offered the same low rates to both new and existing customers. Customers of the country’s banks would have saved €119 million last year if the banks had followed the same approach.