The international rating agency Fitch has assigned a long term and short term rating to Irish Nationwide Building Society (INBS) but has warned that there are risks in its commercial property book that need close monitoring.The agency yesterday gave an A minus long term rating and an F2 short-term rating to Irish Nationwide.
It has also assigned the INBS an individual rating of B.
The ratings reflect the building society's size and Irish mortgage franchise, and strong and consistent profitability underpinned by a strong culture of cost containment, according to Fitch.
"Its asset quality is considered good with a well-secured loan portfolio and risk weighted capital adequacy of 12.1 per cent at the end of 2002 is strong, albeit declining," it said yesterday.
It noted the rapid loan growth at Irish Nationwide that has been in line with the market which has been supported by low interest rates and rising wealth. The agency referred to the building society's particularly strong growth in commercial property.
"Growth of these wider margin, but riskier loans, has helped offset industry margin pressure in residential mortgages."
The report states that the building society has followed its clients by expanding into the UK market, mainly in London, but is cautious about the risks involved.
"There are risk concentrations in its commercial book. To date loan losses have been very low, reflecting rapid growth and increased property prices, but in a weaker economic environment its risks will need close monitoring," according to Fitch.
Irish Nationwide's focus on core products and peripheral retail banking services have helped it to achieve one of the best efficiency ratios within the Irish banking sector. Fitch states that the society's revenues are largely margin related and will be sensitive to changes in profit margins and volumes.
"There is also some variability in Irish Nationwide's non-interest revenues largely derived from both the sale of development properties in which the building society participates and fees relating to the completion of developments. Both these sources are chunky in nature and INBS has a higher proportion of these revenues than some of its peers," the agency said.
