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Irish Nationwide stays in red

City A.M. Reporter
STATE-run Irish Nationwide Building Society (INBS) may need further capital from the government if “almost inevitable” losses this year come in ahead of expectations, its chairman said yesterday.

INBS, which reported a tenfold widening of its losses in 2009 due to a jump in bad loan provisions, is being propped up by a €2.7bn (£2.3bn) capital injection announced by the government in March.

Chairman Daniel Kitchen said further losses this year were almost inevitable as the bulk of its loanbook was moved to the National Asset Management Agency (NAMA), Ireland’s “bad bank” set up to cleanse lenders’ balance sheets of risky loans.

“We are more than adequately capitalised at the moment but clearly if the losses we sustain on the transfers to NAMA become a significant figure, then we would need further capital,” Kitchen said on the sidelines of a meeting of the society’s members.

The Irish government provided most of the bailout via a promissory note, an instrument that will see the cash being paid out gradually over a number of years. Finance minister Brian Lenihan said it would provide a “small buffer” for INBS.

The €2.7bn is intended to absorb losses arising from transferring €9bn worth of loans to NAMA, the first €670m of which were moved to the agency at a 58 per cent discount, the steepest among NAMA’s five participants.

Chief executive Gerry McGinn said INBS would transfer around €1bn worth of loans by the end of next month and a further €2.5bn in a third batch later this year.

Only then would any additional capital needs be known, Kitchen said.