Credit union unable to pay dividend

WEXFORD Credit Union is unable to pay a dividend to its members this year because it has been forced to write down a €3m investment in Anglo Irish Bank.

According to a statement released at its AGM, the credit union owns subordinated Anglo bonds worth €2.99m. Unlike senior bondholders, subordinated bondholders have been forced to share some of the pain of Anglo’s collapse and the credit union was informed in October that it was only being offered 20c per euro — meaning that it has had to make a €2.4m provision for this investment loss in its accounts this year.

The credit union has had to write off a further €2.2m in bad debts, up 98% on last year’s figure of €1.1m, in what manager Ultan Ryan called a “very challenging year”.

He said the €2.4m loss the credit union was absorbing on its Anglo investment was commensurate with the amount that comprises the dividend for its 33,000 members each year.

“This is the first time in the credit union’s [48-year] history that it has not paid a dividend and people are disappointed that they’re not getting the small cash bonus that they usually get at this time of the year this year. The €2.99m investment in subordinated Anglo bonds represents 4% of our total investment portfolio but we would like to assure our members that we hold no other subordinated bonds in any other Irish banks,” he said.

Mr Ryan said the credit union had formerly had a cash deposit with Anglo, but said that this has now been withdrawn from the bank.

Asked why the credit union had invested in subordinated, instead of safer senior, bonds, Mr Ryan said it was a “permissible investment” which had, until recently, been covered by the state banking guarantee.

An Irish League of Credit Unions spokesperson said its members had a €28m exposure to Anglo.