EBS BUILDING Society made profits of €66.6 million in 2007, just 1 per cent higher than a year earlier, after taking a charge of €15 million due to loans relating to solicitor Thomas Byrne.

The building society increased underlying income by 22 per cent to €85.7 million, but profits remained roughly static following the provision relating to loans to the Dublin solicitor and some clients of his Walkinstown practice.

The loan book rose by 9 per cent to €15.9 billion, despite new lending of €3.7 billion in 2007 being down 20 per cent, reflecting the slowdown in the property market. Some 89 per cent of loans, including buy-to-let loans, are to the residential market.

EBS finance director Alan Merriman said the €15 million provision was "the one blemish in 2007" and the biggest loss in 16 years of commercial lending at EBS. He said loan losses normally averaged €4 million a year and the bad-loan charge would be about 0.13 per cent of total loans this year. He added that the society hoped to "claw back" some of the loans owing in the solicitor case.

EBS said it had no exposure to so-called "toxic assets" affected by the international funding crisis, though it borrowed €2.3 billion through the European Central Bank (ECB) in late 2007 to tide it over the end of the year when the availability and cost of market funding was at its worst. It had no ECB loans at the end of 2006.

Fergus Murphy, presenting his first set of annual results since joining EBS as chief executive in January, said: "This should not be confused with emergency lending. All the banks were frozen at the end of last year. Money markets came to a standstill."

ECB borrowing came to 12 per cent of assets at the end of 2007. This has since fallen to €2 billion.

Mr Merriman said EBS had €1.7-€1.8 billion in term funding maturing this year, but customer deposits, long-term funding and capital balances amounted to 87 per cent of loans. EBS has collateral of €4.3 billion that can be used to access market funding.

Mr Murphy said he expected the international funding crisis to continue until at least the third or fourth quarter of 2008 and he believed the US presidential election would create "a psychological new dawn" for the US economy.

He said boardroom issues had made 2007 "a very difficult year", but the atmosphere was "very different this year" and management was looking forward to working with the new board appointed after the society's annual general meeting on April 14th.

Commercial loans to the slowing homebuilding sector came to just 2 per cent of its loan book, or €435 million in loans. Mr Merriman said the society had €40-€50 million in loans to housebuilders on "a watchlist". "They are not causing undue concern but we are paying attention to them."

EBS has provided about 2,000 100 per cent mortgages, representing about 3 per cent of its loan book, or loans of €477 million. Mr Murphy said EBS was "a prudent lender" and had an average loan-to-value (LTV) ratio of 61 per cent on residential lending. It has insurance to cover any losses on the percentage of mortgages over an LTV ratio of 85 per cent.

Mr Murphy said borrowing in the property market had been increasing steadily since the start of the year and lower interest rates and greater affordability later in the year would increase activity.