Horror Loss at EBS?

A

andycole

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Hi -

I read this article in Sunday's Independent - dated the 16th November.
Its an article written by Shane Ross. The direction of the piece is that there has been big losses incurred by the EBS and that this could mean the end of EBS's Mutality Status.

"A highly confidential presentation, prepared by top-dollar spinners Q4, reveals that the EBS recently incurred "a level of provisions and zero profit or loss which will come as a serious shock to stakeholders".

This is the first that I have heard of this - has anyone else heard anything? If the information that Mr.Shane Ross has written about is true - would this affect the ability of the EBS to give out mortgages?

I'm hoping someone will be able to explain or cast some light on the information that is contained in this article. It's scary reading and will do nothing for people's confidence in the Irish Banking sector.

Andy


Reference: http://www.independent.ie/business/irish/horror-loss-at-ebs-may-force-sudden-buyout-1541380.html
 
Maybe if they didn't do their best to dissuade existing members from depositing cash with them they might be in better shape?

Bear in mind that the article cited was written by Shane Ross who is hardly the most neutral or balanced of commentators on such issues.
 

But none of the main points of the article were denied by the EBS Chief Executive Mr. Murphy when he appeared on the Newstalk breakfast show yesterday morning to discuss the article's contents
 
ubiquitous said:
But none of the main points of the article were denied by the EBS Chief Executive Mr. Murphy when he appeared on the Newstalk breakfast show yesterday morning to discuss the article's contents
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Fair enough. I was not aware of this.
 
The EBS primarily lends to people to buy their houses. They have very little exposure to anything else.

They can make a small provision every year for the next few years and show profits. Or else, they can get it all out of the way this year by making big provisions. This would result in losses.

I understood that the PR documents outlined the different ways of handling the different outcomes which may arise. I don't think that they predicted losses as such. But I did not see the documents.

Brendan
 
andycole said:
I am going to make contact with my local EBS Branch and see if I can get any assurances. I will shortly be taking out my first mortgage with EBS so as you can imagine this is not something that I want to hear about.
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This brought a smile to my face, the staff at branch level are, how shall I but it. Very nice to deal with but....

I would not we worrying about your Mortgage, the worse that can happen is you won't get it, and this maybe a blessing in disguise. Even it you lose your deposit...
 
http://www.independent.ie/business/irish/ilp-in-takeover-talks-with-ebs-management-1548304.html

"Irish Life & Permanent is in preliminary takeover talks with EBS, which could result in the building society giving up its 73-year history of mutuality."

Hi folks -

Further to my earlier post with regard to the EBS story that appeared in last Sunday's Indepenent - I have read in today's Irish Independent that there are merger talks taking place between the EBS and Irish Life and Permanent?

If losses have occurred within the EBS then as was mentioned in the article by Shane Ross - one of the remedies outlined is the end of mutuality and its buy out by another banking institution?
How do people feel about this story that is breaking today?
Why is the EBS management talking to the Irish Life and Permanent?
Personally I would prefer for the EBS to maintain it mutuality status.
 
In contrast, the Times says BOI are in talks with IL&P. It is all just speculation at the moment.

However, I feel that EBS and IL&P are a bitter "fit". For one thing EBS already sells Irish Life products. Also, neither bank has a huge exposure to development land so should be sustainable notwithstanding the resi mortgage book.
There is also the cultural aspect. IL&P would have a better understanding of a mututal society and is easier to swallow for members than the 2 big "bad" banks.

Also, BOI and IL&P would have 50% of the life assurance market if they merged. Whatever about steam-rolling over competition law for bank activities, taking such a stance in the competitive life assurance market could and should prove more difficult.
 
VOR said:
However, I feel that EBS and IL&P are a bitter "fit". For one thing EBS already sells Irish Life products.
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Except for the fact one is public and the other is a mutual.
From a fundamentals point of view the EBS don't really need to merge with anyone although if they felt the need to be part of a bigger entity then Rabo might be the better fit. (as far as I am aware they are also a mutual?)
This option has been explored in the past and I think the current EBS CEO has links to Rabo so maybe he was originally chosen with that in mind?
 
Can I ask has anyone heard anything more in relation to the story written by Shane Ross and the "horror" loss at EBS? Was this a "what if scenario undertaken by the EBS?" or has the EBS incurred a large loss for 2008?
The story does not seem to have taken off or commented upon in this week's newspapers or television - when is the next agm for EBS?
 
Andy.
I wouldn't read too much into the Shane Ross article.
The good senator has had an axe to grind with the EBS for some time and takes any opportunity he can to have a dig at them.

One of these days Ross will write something positive about them and I'll probably fall off my stool in shock. The EBS are not in any real trouble at the moment. I think their only real exposure over the last year or so has been to dodgy solicitors rather than dodgy developers! (note they have taken a financial hit this year...not sure if it amounts to an actual loss though!!)

AGM won't be for another couple of months. (think it's usually late spring)
 
I suppose a couple of grand windfall for us members is out of the question.


Murt
 
Murt10 said:
I suppose a couple of grand windfall for us members is out of the question.
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?? From what?
A demutualisation? This has been rehashed on this site many times. You wouldn't get anywhere near 4 figures if the EBS decided to demutualise. (and that was in the good times ).
 
Apologies if I have missed this elsewhere. Does the government have the power to automatically demutualise EBS or Irish Nationwide without the approval of the members?
 
That's an interesting question - I should think not! My thinking and also as a member of the EBS - is that it's the members who must vote firstly and then in favour of de - mutualisation?
So if the majority of the members of the Building Society do not approve of demutalisation then that's it? How can the Government overcome this resistance - after all it belongs to the members and the money comes from these members, not the Government?
Hope I'm not wrong about this - because I would much prefer to see the EBS hold onto their mutual status.
 
Well the Building societies act is here
http://www.irishstatutebook.ie/1989/en/act/pub/0017/index.html
I don't see anything in there from a quick enough glance at the more likely sections to suggest the government has the power to force them into anything.

I'd be amazed if as members it was anyone other than us that had the final say.
I also would favour the keeping of the mutual status.
Anything that is put before the members would have to be sufficiently palatable to get agreement.

Then again, a lot of people have this wildly optimistic view of demutualisation and the riches (not!) that it brings. I suspect that if the board ever put forward this option more than enough members would be falling all over themselves to vote in favour of it.
 
If the losses are such that the society is insolvent, then if the Gov't puts billions of € into it, then it will control the society and can do what it wants.

Effectively, the members, and I am one, will have allowed the management to ruin the society and make it insolvent by imprudently managing the affairs - for example, by chasing a higher interest rates offered by the Icelandic banks, they have lost (probably) millions of members money.
 
jpd said:
If the losses are such that the society is insolvent,
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Is that a hypothetical musing or do you actually think the EBS is in any danger of insolvency? To the best of my knowledge they don't rely on capital markets for their funding so they have no exposure to the current credit problems.

Their biggest problem over the last year or 2 was getting stung by one or 2 of those dodgy solicitors).

The EBS is a bread and butter building society that largely fund their lending with savings they take in.

How and ever, I do notice that in the building societies act of 1989 that
The Central Bank shall revoke a Building Society's authorisation if-
a society has become or is likely to become unable to meet its obligations to its creditors and shareholders or suspends payments lawfully due by it.
(section 40, Paragraph 2 subsection e)

Potentially via that mechanism could the government supercede the members.
Still though , it's pie in the sky. The only danger the EBS is in is from Shane Ross doing a Joe Duffy on it and senselessly whipping up the masses against it!
 

I wouldn't be so blase about EBS. 11% of their loan book is in commercial real estate and a further 13% is in the buy to let market. As for their funding, only around 53% comes from customer deposits so they are reliant on capital markets.
Having said all that they are in a strong position with a Tier 1 ratio of 9% but I think what Ross was pointing out was that there is more bad news coming down the line and the Society is obviously looking at options on how to deal with it.
 
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