Irish Nationwide Demutualisation

gnu

Hi,

I heard today that Irish Nationwide are going ahead with this and that some ppl will get a windfall. Does anyone know if this is true and who would qualify?

Cheers

pete

gnu wrote:

Hi,

I heard today that Irish Nationwide are going ahead with this and that some ppl will get a windfall. Does anyone know if this is true and who would qualify?

Cheers

yes, it's true, and even though i've had an account with them for 7 years i doubt if i'll qualify*.

From http://www.thepost.ie/post/pages/p/story.aspx-qqqt=THE%20MARKET-qqqs=themarket-qqqid=3652-qqqx=1.asp

The Sunday Business Post has established that 125,000 members are likely to qualify for payments when the building society ends its mutual ownership status and is sold.

The figures, which include borrowing members, suggest that a society member will receive an average payment of around €12,000.

* = i have about €2 in the account.

RainyDay

Check out the FAQ's over at Askaboutmoney.com.

I would strongly encourage any existing Irish Nationwide members with voting rights to vote for Brendan Burgess in the forthcoming election for directors in order to speed up your demutualisation windfall.

Blackjack

Rainyday - I note from the notice of the AGM that the present board do not feel Brendan Burgess to be a suitable candidate for the position of Director, and have been quite scathing of his comments in both the cover letter and the notice itself.
I note that Brendan Burgess appears to be the owner of the askaboutmoney website.

I'm not having a go at the guy or at the present board in any way, however what's the background here?.
I would be interested to hear how he will be able to speed up the demutualisation process, given that this was already approved by the members, and what benefit will it be to members to elect a Director with a very apparent lack of support from the Chairman.

Again I have no idea of the background here (there does appear to be a very hostile message in the meeting notice) and would be interested to hear what the other side of the story is, and what involvement Brendan Burgess has had up until now with IN.

gnu

Thanks for the replies, I'm not sure if I'll qualify or not, fingers crossed though!

I never bothered go to an AGM before so I don't know what the other 2 guys are like - but there does seem to be a lot of hostility to Brendan Burgess. I emailed him to ask his views on the whole thing but haven't heard anything back yet. I agree Blackjack, I just don't know how he can make it happen any faster. I thought once the new legislation was in place, there would be no opposition from within Irish Nationwide.

BrendanBurgess

Hi gnu

I have responded to all emails in my Irish Natiowide folder, although to be honest, some of the responses were simply acknowledgements with a promise to deal with the question as soon as possible. I have received a lot of questions and comments by emai and phone from members and journalists and I am working my way through them, in order of priority. I am also doing my day job and running Askaboutmoney.com and chairing the Consumer Panel of IFSRA, so if there is a delay in getting back to you, I hope you underestand

The Chairman said some nasty things about me, and here is my response - it's a long one:

Response to Chairman’s address to members

Let me state from the outset that my address to members is fair reflection of the lending practices of the Irish Nationwide. There is nothing inaccurate in it. Nor is there anything in it which, although accurate, might be misleading. The Chairman’s address does not contradict any factual statement in my address. I will contradict directly untrue statements in his.


“Mr. Burgess did not furnish an election address as provided in the Building Societies Act and the Rules of the Society”

The Rules of the Society set a closing date for motions of 31 December and a closing date for election addresses of 30 November. I confused the dates and got the election address in after 30 November. They rejected the address. I appealed to IFSRA as provided for by the Building Societies Act. IFSRA took legal advice and said that they could not force them to distribute my address, but they suggested to them that they should do so. The Irish Nationwide agreed to submit an address which was not misleading. I asked them to point out what parts of the address they found misleading and they refused to point out anything misleading. So I could not fix it. I repeat, there is nothing misleading in my address. I pride myself on being fair in my dealings. When I get things wrong, I correct them. The Irish Nationwide has identified nothing incorrect in my statement.

It is misleading for them to say that I declined an opportunity to provide an appropriate election address. I accepted willingly and asked them twice in writing and at least once over the phone to tell me which bits were wrong or misleading.

It is important to point out that under the Building Societies Act I was limited to 300 words. It is extremely difficult to convey everything within that limitation. I would express some things differently if I had more words to use. I would also say a lot more about the lending practices of the Society. My address in its entirety is not inaccurate or misleading.

How much did and does the Society charge on arrears?
I said “There is nothing illegal about charging its customers 20% penalty interest on arrears”. I am restricted to 300 words. It would take pages and pages to explain the intricacies of the Irish Nationwide’s penalty interest system.

Penalty interest of 20% was charged on arrears on all loans up to the end of 1997.
Up to the end of 2002, they charged up to 12% penalty interest on arrears on some loans.
At the 2003 AGM, penalty interest was banned on home loans, but not commercial loans.

It might appear to be more appropriate to say “there was nothing illegal in charging 20% penalty interest on arrears”. But this would convey the impression that they have stopped charging penalty interest which they most certainly have not. The Society charged 20% penalty interest on arrears on all loans up to 1997. There are many borrowers today who are still in arrears with the Irish Nationwide due to the imposition of that penalty interest. And don’t forget the penalty interest of 20% is on top of the ordinary mortgage rate which in 1997 was around 12%. So arrears were costing customers 32%. As I say, it’s not easy to convey this in few words.

They say:

“…in 2003 members overwhelmingly supported your Board’s proposal not to charge interest on arrears on home loans” I submitted a motion to the 2003 AGM calling for this penalty interest to be removed from the rules. They countered with a motion of their own banning it for home loans and allowing an additional rate on arrears of ECB + 5%.

By the way, “commercial loans” include loans to farmers, small businesses and small residential investments. They are often secured on or include the family home.

They say: “At present we only charge 1.75% per quarter interest on arrears on commercial loans.” Don’t they sound very reasonable? 1.75% is very low, isn’t it?

But this statement is simply wrong and hugely understates the real cost of being in arrears. This is additional interest on top of the normal interest. So if you are paying a rate of 6% on a loan to buy a residential investment property and you fall into arrears, you will be paying a total of 13% on those arrears! 13% is a huge figure when the ECB rate is only 2%.

The Society does not pass on interest rate cuts to many customers
I said “the Society does not pass on interest rate cuts to many of its customers”. They say that “this does not reflect the real situation”. This is well documented. I said it in my written address to members last year and IFSRA approved it. It absolutely reflects the real and horrific situation which is as follows:

When you take out a non-home loan from the Irish Nationwide you pay around 1% more that you would pay for a home loan. If you were a particularly risky customer, e.g. if you had a poor credit record, you might pay even more. This is sound commercial practice – risk adjusted interest rates. I am not disputing the appropriateness of this. But once you are in, they don’t pass on the full rate cuts to you. This is unfair. Interest rates have fallen by 10% since 1993 and they have passed on only 5%. If you noticed this, and asked for a reduction, you would have received it, if you were in a strong enough position to negotiate. If you were in arrears and so could not move, you got no rate cut. If you had a small loan, where the cost of moving would not be justified, you got no rate cut.

When is a Standard Variable Rate not a Standard Variable Rate?
They say “The Society has a standard variable rate for homeloans of 3.5% APR which is lower than most of our competitors”. I would be so delighted if this was true. I am hoping that this is a statement of their current policy on the subject. If this is true, then anyone paying over 3.5% on a variable rate home loan, should now insist that their rate be reduced to 3.5%.

But it is simply wrong, incorrect, misleading, not true. The Irish Nationwide has this “SVR” for new customers only. They actually tell some existing customers that the SVR for customers with loans taken out before 2003, is 3.9%. While other lenders give first year discounts, I am not aware of any other lender which has different rates for new and existing customers. The Irish Nationwide simply does not have a Standard Variable Rate. I am astonished at this claim. I am aware of customers who are paying 5.75% on their home loans.

One customer,who is paying 5.75%, has been refused a reduction because she is in arrears. It galls her to hear the Irish Nationwide claim that they are no longer charging penalty interest on arrears. 5.75% is 64% above their “standard variable rate”. Is that not a penalty for being in arrears?

“Our Standard Variable Rate is lower than most of our competitors”.

They say that their Standard Variable Rate is lower than most of their competitors. From www.mortgages.ie which I think is up to date and accurate.

Variable
EBS [ APR:3.30%]
AIB [ APR:3.35%]
Bank of Scotland [ APR:3.40%]
IIB [ APR:3.50%]
INBS [ APR:3.50%]
Ulster BAnk [ APR:3.50%]
First Active [ APR:3.60%]
IPermanent [ APR:3.60%]
ICS [ APR:3.60%]
Bank of Ireland [ APR:3.60%]

They are cheaper than 4 out of 8 competitors, so claiming that they are cheaper than “most” is simply wrong and misleading. It is even more misleading in that many mortgages these days are trackers which are even cheaper. Check out the best buys tables from IFSRA, or the papers and see how often the Irish Nationwide gets mentioned.

IFSRA did a survey last year of home mortgages and Irish Nationwide was the most expensive.

I do give credit where credit is due
“he has not given credit to your Society for paying one of the highest interest rates on shares and deposits”. Simply not true. I have often acknowledged in radio interviews that people with €20k available should put it in an Irish Nationwide share account as the rate is attractive and there is a possibility of a demutualisation windfall. Check out the “Best Buys” table on my website at http://www.askaboutmoney.com/clubman/BestBuys.htm
The Irish Nationwide appears on three of the tables of best buys. In last year’s address to members in support of motions, I said something to the effect “while the lot of the borrower has improved in recent years…”. I do actually give credit where it is true.
However, I am not going to use up some of the 300 words to highlight where the INBS is good value.

I have even suggested in a Radio programme ( Newstalk 106 I think), that people should consider the Irish Nationwide for a home mortgage if the amount is small as the demutualisation windfall could make it worthwhile.

lomb

can i ask as an irish nationwide share account owner why you are more interested in what mortgage holders pay on interest rather than what the real owners of the money are paid. it is a sign of the times where it is better to spend money than saving it or investing it in property. it is pointless investing money in a deposit account as by the time taxes are paid one is down 3% every year compounded so after 20 years the money is worthless.

the other thing is why is irish nationwide lending money to people who are defaulting? havent the criteria been checked in advance. if a bank or building society had done its job properly than defaulters would make up a very small percentage of the borrowers.

BrendanBurgess

Hi Lomb

I have first hand experience of the misery of the unfortunate customers of the Irish Nationwide who fell into arrears. People whose homes and businesses were repossessed or subject to repossession orders.

I also believe that treating customers well is good business practice.

The lending practices of the Society have resulted in a complete collapse in market share in Ireland and is damaging the long term value of the company.

Brendan

delly

As a matter of interest, i presume the qualification requirements are unknown at this stage. The only reason i ask is because i bought my first house in 2002 with an INBS mortgage, and then sold it in December 2004 while buying my new house with another INBS mortgage. Which means i'm technically an existing customer from 2002, but with a more recent motgage.

BrendanBurgess

Hi delly

When did you buy your new house? If you had the mortgage at the end of December 2004, you will qualify as a borrowing member.

I don't know what happens to people who change mortgages during the year in which demutualisation is announced. It's an interesting question. For official guidance, you should email the secretary and let us know the answer.

Brendan

delly

Thanks for the reply.
I had everything rapped up with the loan cheque issued just before Christmas 2004, which should count me in then. Its a good thing that i didn't hang about until the new year to move into the new house.

gnu

Thanks for the reply Brendan. I'm still not sure how I'll vote but I take your points on board.

RainyDay

Blackjack wrote:

Rainyday - I note from the notice of the AGM that the present board do not feel Brendan Burgess to be a suitable candidate for the position of Director, and have been quite scathing of his comments in both the cover letter and the notice itself.
I note that Brendan Burgess appears to be the owner of the askaboutmoney website.

Yes - Their scathing attack on Brendan has probably drawn far more attention to his campaign than if they had just ignored it! Brendan indeed is the owner of askaboutmoney.com - a non-profit community website which has been providing answers to consumer questions on personal financial issues for 5 years now. Brendan was also recently appointed as Chairman of the Consumer Panel of IFSRA (the regulator for the Financial Services industry), which is a measure of his standing in this industry.

Blackjack wrote:

I would be interested to hear how he will be able to speed up the demutualisation process, given that this was already approved by the members, and what benefit will it be to members to elect a Director with a very apparent lack of support from the Chairman.

Just to be clear, demutualisation has not been approved by members. Another disgruntled member Shane Hogan proposed a motion last year to force INBS to start the demutualisation process. While the board stated publically that they didn't oppose this motion, the vice-chairman voted his substantial batch of proxies against this motion. Nevertheless, the motion was carried, and INBS were forced to formally open discussions with the regulator regarding demutualisation. However, we still have no dates as to when this process will come to conclusion, and when us members will get our windfall into our greedy hands.

Blackjack wrote:

Again I have no idea of the background here (there does appear to be a very hostile message in the meeting notice) and would be interested to hear what the other side of the story is, and what involvement Brendan Burgess has had up until now with IN.

Brendan has been driving a campaign to reform the Irish Nationwide for several years now. He's had some successes with ensuring that the worst excesses of their interest rate policy have been eased.

Hi Gnu - Brendan's presence on the board will ensure that demutualisation happens sooner rather than later.

gnu wrote:

I agree Blackjack, I just don't know how he can make it happen any faster. I thought once the new legislation was in place, there would be no opposition from within Irish Nationwide.

You've hit the nail on the head here. The first question is how long will it take for the legislation to be in place. You may have taken some comfort from the press reports that the Minister had written to INBS saying that the legislation would go through in this Dail term. I take about as much comfort from this as I did from the reports in Feb 03 that;

MEMBERS of the Irish Nationwide Building Society are set to reap windfall gains soon, following a breakthrough in talks to change the law.

and the reports in Sep 04 that

Sources in the building society insisted last night that Minister for Environment Martin Cullen - who has legislative responsibility for building societies - is determined to introduce the Bill to the Dail before Christmas. It is understood that it is on the Government's priority list.

I've heard it all before. The letter from the Minister isn't worth the paper it's written on. Do you really think that this legislation will be high on the Govt's overall list of priorities?

The second (and more important) question is 'Why is INBS waiting for the legislation to change? Why don't they just demutualise now, like Irish Permanent did, and First Active did?'. They have been lobbying for 10 years now to get the 5-year takeover protection clause removed, which is something like taking a 2-hour detour round a 1-hour traffic jam. It just doesn't make sense. Why are members left waiting to realise value for their share in the society, while these guys keep on talking.

In addition to the 'when' question, there is the 'how' question - How is the society going to demutualise? Is a chunk of the members funds going to go to staff & senior management as was reported in this SBPost article;

However, a planned employee share ownership plan (Esop) for staff and management, along with performance and sale bonuses to be paid to senior managers, will likely decrease the total amount available in the pool to be distributed to members after the sale.

Will the selling price be impacted by the 68-year-old MD's unwillingness to let go as reported in this Sunday Times article
Brendan's presence on the board will ensure that the demutualisation focusses on realising value for the members of the society - not for anyone else.

Blackjack

Thanks Rainyday. I asked when I was feeling rather lazy and did some of my own research afterwards which would confirm what you say.

Thanks Brendan also for clarifying the points re the address etc.

RainyDay

Interesting Burgess vs INBS article in yesterday's Indo.

gnu

Cheers Rainyday, you have a point! I didn't realise this had been going on for so long!

Victor

lomb wrote:

can i ask as an irish nationwide share account owner why you are more interested in what mortgage holders pay on interest rather than what the real owners of the money are paid.

I don't know the details but if both depositors and borrowers are equal members then the "real owners" of the money is a facetious argument.

So how long have you been carpet-bagging.

BrendanBurgess

Hi Victor

Share account holders and mortgage holders are not equal. The mortgage holders only have rights to vote on the demutualisation resolution. They can't attend ordinary meetings of the Irish Nationwide.

The EBS, on the other hand, makes mortgage holders full members.

brendan

lomb

Victor wrote:

I don't know the details but if both depositors and borrowers are equal members then the "real owners" of the money is a facetious argument.

So how long have you been carpet-bagging.

the depositors provide the liquidity to the 'bank' or whatever fancy name u want to call it. there will always be people to borrow money at the right price as long as the sun shines.

it is the depositors that own the bank if it is a building society in my opinion as without them u wouldnt be able to loan a penny to anyone. all the talk in ireland has focussed on when borrowers have got into trouble borrowing too much, what about the depositors who have had their life savings eroded in deposit accounts. no one talk about them...........

and i have been 'carpetbagging' since 1997

Victor

lomb wrote:

the depositors provide the liquidity to the 'bank' or whatever fancy name u want to call it.

Eh, how about securitsed funds where a bank either before or after lending gets investors to put up X hundred million? Again I don't know the particulars of INBS, but I suspect depositors may make up a minority of the financing.

lomb

Victor wrote:

Eh, how about securitsed funds where a bank either before or after lending gets investors to put up X hundred million? Again I don't know the particulars of INBS, but I suspect depositors may make up a minority of the financing.

true, which is why when a building society becomes a bank, shareholders buy the building society off its owners. hence they are trading cash for capital (assets like property,goodwill etc)

BrendanBurgess

From the Irish Nationwide's 2004 accounts:

Customer Accounts: 4775
Reserves 700
Total 5,500

Debt Securities issued: 2,000 ( 1750 of which was issued in 2004)
Deposits by banks 1,067
Total 3,000

Victor

BrendanBurgess wrote:

From the Irish Nationwide's 2004 accounts:

Customer Accounts: 4775
Reserves 700
Total 5,500

Debt Securities issued: 2,000 ( 1750 of which was issued in 2004)
Deposits by banks 1,067
Total 3,000

Is that number of accounts or amounts of money?

RainyDay

Victor wrote:

Is that number of accounts or amounts of money?

It's gotta be amounts of money - Looks like it is denominated in millions, so reserves of '700' represents 700 million.

Daniel McCarthy

Hi Brendan, Similiar to the question raised by Delly, I currently have a mortgage with INBS but am in the process of selling my home and thereby will, I presume be forced by INBS to clear the outstanding mortgage (70K) with the proceeds as it will no longer have the title deeds as collateral. I guess this potentially rules me out of any benefit from the demutualisation process. I would be in a position to put €20k of the proceeds into a share account and may qualify as I understand it if the society does not announce a demutualisation date within 24 months of opening the account. I presume that if I buy another home and take out a new mortgage with INBS I will not benefit from the demutalisation process?

Your views would be very welcome/

BrendanBurgess

Is it possible to sell your home while keeping the loan?

I doubt it, but again contact the SEcretary for official confirmation.

brendan

besty

Hi brendan,
any ideas when the windfall is actually going to be paid?

BrendanBurgess

There are many hurdles to overcome before the demutualisation can take place. This time last year, we thought it would have been paid out by now.
Now we think, it will be this time next year.

Brendan

besty

ok, thanks a million brendan

hawkmoon269

BrendanBurgess wrote:

Hi Lomb

I have first hand experience of the misery of the unfortunate customers of the Irish Nationwide who fell into arrears. People whose homes and businesses were repossessed or subject to repossession orders.

I also believe that treating customers well is good business practice.

The lending practices of the Society have resulted in a complete collapse in market share in Ireland and is damaging the long term value of the company.

Brendan

Please provide stats and back-up for your assertions that "the lending practices of the Society have resulted in a complete collapse in market share in Ireland and is [sic] damaging the long term value of the [sic] company"

hawkmoon269

RainyDay wrote:

Check out the FAQ's over at Askaboutmoney.com.

I would strongly encourage any existing Irish Nationwide members with voting rights to vote for Brendan Burgess in the forthcoming election for directors in order to speed up your demutualisation windfall.

Please provide details of any interest, financial or otherwise, if any, you have in Irish Nationwide, or of any connection you have to Brendan Burgess.

I think if you are making recommendations like the above it is only fair if you make clear where you are coming from (ok, I realise it's after the AGM now).

hawkmoon269

RainyDay wrote:

Will the selling price be impacted by the 68-year-old MD's unwillingness to let go as reported in this Sunday Times article

Rupert Murdoch (for example) is considerably older than that.

I hope you are not engaging in ageism, Rainyday.

BrendanBurgess

Hi Hawkmoon

Speak to any solicitor - they will tell you that they are not coming across Irish Nationwide mortgages.

Speak to any mortgage broker - most are not recommending Irish Nationwide except in cases where they cannot get loans elsewhere.

Speak to other mortgage lenders - they are not coming up against the Irish Nationwide.

I don't know if IFSRA or anyone else provides statistics, but I am sure you will be able to do that research yourself.

Tanks for corecting my gramer

Brendan

RainyDay

hawkmoon269 wrote:

Rupert Murdoch (for example) is considerably older than that.

I hope you are not engaging in ageism, Rainyday.

It really doesn't matter whether I'm being ageist. What matters is whether any potential buyers will be ageist - Will other financial institutions want to buy into an institution which has failed to bring on the next generation of executives? The only new executive director over the last 10 years only stayed for about 18 months (Maurice Harte). What about succession planning?

hawkmoon269 wrote:

Please provide details of any interest, financial or otherwise, if any, you have in Irish Nationwide, or of any connection you have to Brendan Burgess.

I am a share-account member of Irish Nationwide, so I have the same interest as many Irish Nationwide members in getting the maximum value from my membership. I've also been interested enough to attend the AGM over the last few years and seen the manner in which board members ignored and glossed many serious questions raised about the future of the Society.

Brendan Burgess has been a friend of mine for about 5 years now, and I'm a moderator on the community discussion board askaboutmoney.com owned by Brendan. I have no financial relationship with Brendan. I wasn't canvassing support for Brendan because I like him - I was canvassing support because we really, really need some new blood at that board table - somebody who will represent the best interests of the ordinary member.

hawkmoon269 wrote:

I think if you are making recommendations like the above it is only fair if you make clear where you are coming from (ok, I realise it's after the AGM now).

While it is too late for the 2005 AGM, the chances are that we'll be raising the very same issues again at the 2006 AGM, so I'm happy to get this issue out of the way now.

robbie1876

Is there a minimum amount of money required to be deposited in a share account to qualify for the windfall, and if so does it have to be there for a minimum period of time?

EDIT: from askaboutmoney's site - "it is likely that shareholders with at least €127 in a share account for the two years prior to the conversion resolution and people with mortgages of at least €627 when the conversion resolution is proposed, will qualify"

Many thanks,

Robbie

hawkmoon269

Brendan and Rainday, thanks for your responses.

Brendan, surely the 2004 results were very satisfactory? Are we effectively saying that they are now getting most of their new business from the UK market? I would question your view that their policies will lead to a decline in long term value. It could be argued that their strategy has proven a success.

Yorky

I know this seems like a daft question at this stage but is there any chance of opening an account with INBS at this stage in order to qualify as a carpet bagger?

lomb

as things stand u can open a share account for 20000. it needs to b there 2 years to qualify. and nationwide will probably be sold by then.

imalegend

any1 have a link of the exact criteria u need to meet to qualify for a windfall...i have had an account since 1982 but i read somewhere if your account drops below 107 euro you will not quailfy.is this correct as i have zero in the account i think.

smokingman

Anyone know if the news this morning would result in a payout to employees and shareholders?

My brother works in there and he only found out about this on the radio this morning...

http://www.independent.ie/business/irish/irish-nationwide-set-for-takeover-1478317.html

gar32

Your brother must not be working there long??? I thing any payments to employees will be service related. i.e. The long your there the more you will get. As for share holders yes but with a few rules. Much more info on askaboutmoney.com if you want to read the history hope you get a few quid of your bro!!!

SerialComplaint

In previous demutualisations, staff recieved the same as one deposit member, with no allowance for long service.

ingen

this thread should now be moved to "pie in the sky section"....


as it looks like there is no windfall coming........:eek:

DubTony

ingen wrote: »

this thread should now be moved to "pie in the sky section"....


as it looks like there is no windfall coming........:eek:

This user should be awarded a prize for "most ridiculous bump". How the fu*k does anyone even find a thread that hasn't been posted in for almost 2 years. It must be 20 pages back ffs.

I'm thinking lives need getting ... :rolleyes: