INBS raises €750m in guaranteed bond sale

IRISH Nationwide Building Society, whose controversial managing director, Michael Fingleton, retired recently after 37 years at the helm, has raised €750 million through a government guaranteed bond.

It is due to be repaid in September 2010, bankers close to the transaction said.

The 3.5% bonds had to carry a coupon 2% above the benchmark mid-swap rate, the bankers said.

Citigroup, DZ Bank AG and Goldman Sachs Group managed the sale.

The performance of the building society last year was abysmal as bad loans topped €464m. The figure was 10 times the 2007 write-offs.

Analysts said in a report in March, ahead of the 2008 results, that Irish Nationwide would need further investments of €900m to top up its capital base of €1.2 billion.

In the current year it has €2.2bn of funding that has to be renegotiated and the €750m may be part of that process.

A new analysis into European banks by Keefe, Bruyette & Woods, meanwhile, has found Ireland’s big two banks AIB and Bank of Ireland are among the handful that will need extra funding.

Six banks in all fall below the 4% equity tier 1 ratio and will require a minimum of €8bn to get above the 4% benchmark rate.

It has emerged also that the Government and financial regulator have talked to Anglo Irish Bank about waiving capital adequacy rules.

Unless that is done then Anglo will require about €3bn in fresh funding from the State to meet the new guidelines.

None of the parties involved were prepared to comment, according to media reports.

Anglo was due to get an injection of €1.5bn from the State last December, but following the directors’ loan scandal the Government nationalised the bank fully in January without injecting new capital.

Sharp loan loss increases, in the meantime, could result in the bank requiring a capital injection of €3bn for it to remain within current guidelines on capital ratios.

Already the government has approved €7bn of capital, €3.5bn each for Bank of Ireland and AIB.

Next Wednesday shareholders in AIB meet in an extraordinary general meeting to vote on the Government’s offer.

Bank of Ireland shareholders have already voted to accept the funding, which gives the State a 25% stake in each bank.

Some analysts believe that the funding difficulties are so deep that the State will also have to nationalise the two main banks in the months ahead as funding requirements continue to remain an issue for them.