Building societies back capital move

MEMBERS of the Irish Nationwide and EBS building societies have voted in favour of resolutions which will enable the Government to invest fresh capital into both companies.

It was also confirmed, yesterday, that preliminary discussions regarding a merging of the two companies have taken place but are in the “very early stages” and won’t commence in any serious sense until early next month.

At EBS’s special members’ meeting, in Dublin’s Burlington Hotel, the company’s chief executive Fergus Murphy and chairman Phillip Williamson told members – 80% of whom are in favour of the company remaining mutualised – that the likelihood would be that the company would be fully nationalised if yesterday’s resolutions weren’t passed.

Mr Murphy told members that every alternative avenue – including raising funds through members – had been investigated, but that the Government source was the only option. Mr Williamson added that the company’s future would be “very, very uncertain” if this option wasn’t realised.

EBS is sticking with its €300m-€400m estimate as to what it needs in fresh funding from the Government in order to shore up its financial reserves after its portion of loans are transferred to NAMA.

This transfer is likely to get under way in February, but Mr Murphy admitted, yesterday, that it remains unclear what the full amount the company will require in new funding might be if the EBS/INBS merger goes ahead.

The board added that “a lot of pressure” was coming from the Government to merge the companies but a successful merger would result in the company becoming significantly larger.

In the end, EBS members voted in favour by 94% and 93%, respectively, for the two resolutions freeing up the board to issue the Government with special investment shares.