Irish commercial loans hurt INBS

AS much as 64% of the €464 million set aside by the Irish Nationwide Building Society (INBS) to cover unpaid loans last year related to lending in the Irish commercial property sector.

In its annual report, published yesterday, the company’s board said: “The Society is of the view that the Irish commercial loans are appropriately provided for against impaired loans at the balance sheet date and reflect the Society’s best estimate of the amounts that are likely to be received from borrowers and the timing of those receipts.”

The €464m impairment provision was reported as part of the Society’s full-year results for 2008 and was a hefty increase from the previous year, when just €66m was set aside for property-related bad loans.

The increase in impairment charges, a near wiping out of fee income from property transactions, the general economic downturn and the fall in property values all resulted in INBS recording a pre-tax loss of €280m last year. The company’s loan book also decreased, last year, to €10.47 billion from more than €12.3bn at the end of the previous year.

With regard to the vastly enlarged impairment charges for last year, the report stated they reflected the changed economic circumstances and that the company “will continue to support borrowers where this ensures the best outcome for the Society in the medium to long-term”.

Elsewhere, the annual report said that the company’s “own funds ratio” — a significant measure of a company’s total capital requirements — last year fell below the 11% level imposed by the Financial Regulator in March of last year.

The ratio fell from 12.3%, at the end of 2007, to 10.2% by the end of last year.

INBS said that the Regulator has been notified and is reviewing the matter. “Having considered the maximum monetary penalty which could be imposed under the administrative sanctions procedure, the board does not consider this to be a material financial amount.”

Earlier this week, INBS announced former Arthur Andersen and Citibank executive, John McGloughlin as its new chief financial officer. Meanwhile, the Society’s long-standing chief executive, Michael Fingleton is due to leave the company tomorrow.