IRISH NATIONWIDE has retained investment bank Goldman Sachs to advise the building society on the potential merger of the society’s residential loan book with the State’s other customer-owned lender, the Educational Building Society (EBS).
The investment bank has been engaged by Irish Nationwide since 2007 when it had planned a trade sale, but that process was postponed due to the financial crisis.
A spokesman for Irish Nationwide said the building society had retained Goldman Sachs and Dublin law firm McCann Fitzgerald for some time to advise senior management. He had no comment on the nature of the work being carried out currently by the advisers.
In a separate development, the building society has appointed former Ulster Bank executive Declan Buckley as head of commercial banking. The position was previously held by Tom McMenamin who recently retired from his full-time position at Irish Nationwide.
Mr Buckley, who was previously Ulster Bank’s head of business banking in Ireland, took early retirement from the bank as part of its redundancy programme earlier this year, when 750 people left the bank.
Goldman Sachs is understood to be assessing how Irish Nationwide may be merged with EBS once loans of €8.3 billion are transferred out of its €10 billion loan book into the National Asset Management Agency (Nama).
The building society will be left a shell of its former self with residential mortgages of about €2 billion remaining once the commercial property and development loans are sold into Nama. The sale of the loans at a discount is expected to leave Irish Nationwide needing at least €1 billion capital.
The Government recently introduced legislation allowing the State to take a “special share” in a building society in return for a capital injection.
The establishment of Nama is expected to be a catalyst for consolidation in the banking sector, possibly leading to the creation of an enlarged mutual comprising Irish Nationwide and EBS.
Fergus Murphy, chief executive of EBS, said yesterday the building society will probably get capital by early next year to absorb losses on bad debts from its €524 million development loans.
“Given assets are moving into Nama during the first quarter of 2010, late 2009 ideally or the first quarter of 2010 would be when the capital would come,” he said.
Mr Murphy said the building society needs about €300 million in capital. The building society will transfer about €900 million of loans to Nama.
EBS can remain independent with the aid of State capital, said Mr Murphy, though he is open to talks with other lenders about a “third force” in Irish banking by merging with the Irish Nationwide and Permanent TSB. The building society has a loan book of about €17 billion, compared with Permanent TSB’s €40 billion and Nationwide’s €10 billion. – (Additional reporting: Bloomberg)
