EBS open to idea of case-by-case ‘debt forgiveness’

THE EBS Building Society — which yesterday reported a seven-fold increase in annual after-tax losses, to €590 million — has said that it is open to the concept of “debt forgiveness” for defaulting mortgage customers, but only on an individual case-by-case basis.

The company — which is set to form one of the two pillars of a revised Irish banking network, via its pending merger with AIB — said that it won’t take a systemic approach to debt write-offs, but would consider a “customised” approach. Earlier this week, AIB suggested it would consider debt forgiveness for mortgage defaulters, but gave no further details.

Latest annual results for the EBS show that the building society-turned-bank made an after-tax loss of €589.6m in 2010; significantly up from a loss of €78.8m in 2009. Last year’s loss was driven by a €285m impairment charge and additional losses and impairments relating to the transfer of loan assets to the National Asset Management Agency (NAMA). Pre-tax losses — excluding NAMA transfers — amounted to €620.6m last year, up from €99.3m the previous year.

While the level of EBS mortgage holders in arrears went from around 6% of the loan book to over 8%, that level still only covers around a third of the company’s mortgage customers and management said that arrears levels have been relatively contained.

EBS’ chief executive Fergus Murphy called 2010 “a very, very difficult year” for the company, but said that it has made “strong progress” in meeting its objectives in terms of working through the financial crisis. He welcomed comments from the Department of Finance that new capital injections (the EBS is getting another €1.5bn in state-aid, on top of the €875m already received) should be made by the end of July and stated that the merger with AIB should be completed within the next three months, or “by early-to-mid summer”.

On that subject, Mr Murphy said that merger talks are going according to plan and that he remains “very positive about the [EBS] brand going forward”. He said there remains a “strong case to be made” for the retention of the company’s individual brand on a long-term basis. Post-merger, EBS will also offer a more varied banking-related product portfolio.

While the 2,000 job cuts announced by AIB this week don’t include any pending losses at EBS, Mr Murphy said that he couldn’t give complete confidence on no further job cuts occurring in his company, but added that the lender is probably “ahead of the curve” in terms of “right-sizing” itself for the current banking climate.

Yesterday’s results also showed that EBS’ total customer base reached 437,000 last year, with 55,000 new savings accounts being opened. The company controls 10% of the national savings book and 24% of the mortgage loans — including 34% of loans to first-time buyers.