EBS to write off €100m by year end

EBS Building Society will have written off more than 20% of its €500 million development lending portfolio between 2008 and 2009.

The group’s annual report for last year said by the end of this year it will have written off over 20% of its development lending, equal to 45% of a writedown against the value of its original purchase price paid for the land.

Last year, the society wrote off 14% of its development book, amounting to €69m, and says a further 6% of “provisioning” will be required in the current year as the market continues to deteriorate.

Commenting in the annual report, the society said the development finance book is made up of 70 customers that have been “extensively reviewed as assessed by us and independently by others on a number of occasions” during the last half of 2008.

The rest is €26m relating to the other areas of the group’s total loan book of €16.5bn.

The directors warn in the report that it is impossible to calculate the full potential losses that will have to be written off as result of the current downward cycle.

The current charges were a “realistic” assessment of the exposure at this time, they said.

Chief executive Fergus Murphy in his statement said “without doubt 2009 will be another challenging year for financial services globally”.

On the future of EBS and the other Irish banks, Mr Murphy said discussions were continuing with the other three institutions, including EBS, and the government.

“The optimal solution could involve capital injections, funding support or indeed, in-market consolidation,” Mr Murphy said.

Looking to this year’s outlook “the current recession has significant implications for our business and we have already taken steps to recalibrate the cost structures to reflect this new reality. This process is ongoing,” he said.

Outgoing chairman Mark Moran will step down at the next AGM of the group, while finance director Alan Merriman has already resigned his position following losses of €37.8m.

Mr Duffy said the losses were attributable to the decision in 2005 to increase the group’s development finance book.

“It has proven to be a costly mistake, for which the board and management apologise to members,” he said.