EBS ‘will need €300m from state’

EBS Building Society says it will need up to €300 million of a capital injection from the Government after it transfers more than €500m in bad loans to the National Asset Management Agency (NAMA).

EBS said it could transfer close to €1bn to NAMA as other loans to property developers, not directly linked to land or property investments, are also taken under the control of the bad bank.

Fergus Murphy, chiefexecutive of the EBS, said the society will need €300m in fresh capital irrespective of whether its loans are discounted at 10% or 40%.

He reckons the discount or “haircut” on the bad loans to be announced on Wednesday by Finance Minister Brian Lenihan, will be between 25% and 30%.

As a consequence of the €300m loan the society could end up being majority owned by the state as has been speculated in the case of AIB, but that was mere speculation at this stage, Mr Murphy said.

He was speaking at the launch of first-half results by the mutual building society which suffered losses of €8.8m in the first half year, following bad debt charges of €44m on its property loans.

For the same period in 2008 the bank made a profit of €27m, which was before the collapse in the property market.

The mutual is continuing to grow it mortgage business and its share of new retail lending grew 5% to 18.5% over the period.

During the first half EBS issued 2,000 mortgages to first time buyers which averaged around €212,000 against €250,00 in 2008.

Mr Murphy said the society was capable of lending a lot more to fund house purchases but “lack of demand” was holding it back.

On the society’s future he said a third force in Irish banking consisting of a“super mutual” to take on AIB and BoI would be good for Irish banking.

“Some believe that the future lies in a ‘super-mutual’ or ‘third force’ to compete over the longer term with the main Irish banks,” EBS said in its statement with the results.

Meanwhile, borrowers should also prepare for a hike in their mortgage repayments, he warned.

Rates were likely to hold until the start of next year, but the cost of mortgages here is “roughly half” what borrowers are paying in Europe and in the US, he said.