Under NAMA, deal could proceed despite objections

ANY deal allowing EBS Building Society to absorb the assets of Irish Nationwide Building Society technically needs the approval of both sets of members.

It is understood, however, that under NAMA the deal can proceed even if INBS members voted against it.

In reality, INBS has no market value and the transfer of €2bn in dated mortgages and about €5bn of deposits would give a substantial benefit to EBS and reduce its debt equity ratios.

Late yesterday afternoon employees of INBS were informed by letter that Danny Kitchen, chairman of the society, has sought a meeting this week with Philip Williamson, acting chairman of EBS, requesting that both sides get together to decide how “to proceed” with bringing about the merger.

EBS chief executive Fergus Murphy said a deal could be achieved in early 2010.

Even if the INBS members were to vote against the move it is believed Finance Minister Brian Lenihan has powers under the NAMA to push the deal through.

One source said that in the end the new entity will still require up to €400m of taxpayers’ money torecapitalise it, even after the merger.

Irish Nationwide, the smaller of the two, is selling about 80% of its loans to the state’s so-called bad bank, NAMA.

By taking on Irish Nationwide’s remaining loans, EBS would need an additional €100m of capital to shore up the building society against losses, Bloomberg reported Fergus Murphy as saying.

Mr Lenihan said he wants to have “viable building societies”.

“It’s clear from the quantity of assets which both Nationwide and EBS have to transfer to NAMA that the state may well end up being a substantial stakeholder in any resulting building society,” he said.

Combining the two lenders would add to EBS’s deposits and assets and reduce its loan-to-deposit ratio, Mr Murphy said.