Nationwide to accept €2 billion from state

By Joe Brennan

Irish Indepenent Saturday December 19 2009

Irish Nationwide chairman Danny Kitchen said the society, which yesterday received backing from members to accept up to €2bn of state capital, had not considered winding itself up as an alternative.

The capital injection, necessary as the society absorbs massive losses on €8.3bn of loans bound for the National Asset Management Agency (NAMA), would give the Finance Minister “de facto” control of the society, Mr Kitchen said at a special general meeting of members.

“It gives the minister the power to do whatever he wants with the board,” he confirmed.

The Government pushed Nationwide in the last month into formal merger talks with rival EBS, which also held a special meeting yesterday, paving the way for a €400m investment from taxpayers.

“I would stress these discussions are at a formative stage and I have little progress to report,” said Mr Kitchen.

Longstanding dissident member Brendan Burgess told the floor that “the society has failed” and asked whether the board would consider a wind-up. But Mr Kitchen said: “I can’t see us getting to that point, because of the merger discussions that are ongoing.”

Only about 150 of its estimated 200,000 members attended the meeting.

The chairman said he could not say if the society’s assets would still exceed its liabilities following the NAMA discounts.

‘Stepping stone’

The Government had estimated that discounts would average 30pc across the industry — but analysts believe that Irish Nationwide’s hit will be above average. Mr Kitchen, who took over as chairman earlier this year, said he envisaged the Government investment to come on a “drip-feed basis” when 80pc of the group’s loan book is taken over by NAMA, beginning next month.

He said the society “hasn’t been brought into the Government’s confidence” as to whether a merger with EBS is a “stepping stone” as part of broader plans to consolidate the country’s smaller lenders.

Irish Life & Permanent has made it clear that it is keen for its banking division to participate in such a process.

Mr Kitchen also confirmed that former group chief executive Michael Fingleton still hadn’t repaid a €1m bonus he had promised to refund to the society. “There’s little by way of legal address that can be brought to bear,” he said.

The society received opinion from barrister Michael McDowell, the former justice minister, last spring that the bonus did not breach the terms of the €440bn state guarantee scheme.

- Joe Brennan

Irish Independent