THE CHIEF executive of EBS Building Society has said that the bank is “keen” that the National Asset Management Agency (Nama)takes over land and development loans worth between €750 and €800 million from the bank at a discount of between 20 and 40 per cent.
Speaking on RTÉ’s This Week programme, Fergus Murphy said that, because the bank’s capital ratio will be reduced on the back of the transfer of the discounted loans to Nama, the bank would also need an additional €300 million in Government capital. He said this would be necessary to ensure that EBS reaches the international standards for capital ratios, which have increased in the last 18 months. “Although this is a huge amount of money, it’s a small amount relative to the other amounts of money mentioned in relation to other institutions.”
He said that €300 million would give EBS a core Tier 1 Ratio of around 7.5 per cent which would be “robust” from an international point of view.
EBS was one of the six financial institutions covered by the bank guarantee scheme last Autumn.
Mr Murphy explained that the bank’s land and development loans constitute 3 per cent of its portfolio, the equivalent of €527 million. This is in addition to between €200 and €250 million worth of associated loans in the area of commercial investment which are connected to that portfolio. The total €750-€800 million worth of loans which he hopes will be transferred to Nama, is spread over 60-70 borrowers and consists of performing and non-performing loans.
He said he expects the transfer of the loans to Nama to take place by the middle of next summer.
On the subject of mortgage interest rate rises, Mr Murphy said that the bank was “doing everything we can not to put interest rates up” and had “no immediate plans to increase margins”.
He said that a recent IMF report showed that margins in Irish banks are about half of what they are in the UK, Germany and France. For international investors, this puts Ireland at a disadvantage in securing lending he said. He also predicts margins to go up over the next year, but that the bank is looking at other ways to increase margins, such as buying back debt rather than increasing residential mortgage rates. He said that this will be re-considered at the end of October.
