Credit Union's €2.4m Anglo loss
UNABLE TO PAY DIVIDENT FOR FIRST TIME IN 48-YEAR HISTORY
THE ANGLO Irish Bank debacle has reached deep into the pockets of thousands of Wexford people, depriving them of their annual credit union dividend.
Wexford Credit Union say an investment in Anglo that went dramatically wrong has resulted in a loss of €2.4 million - roughly the value of the dividend they would pay out in any given year.
The Anglo bombshell means the 33,000-member credit union is down a total of €4.6 million this year, as they must also write off €2.2 million in bad debts.
Manager Ultan McCabe says the board are ' deeply disappointed' that they cannot give members a dividend this year
' This is the first time in the credit union's history that it hasn't paid a dividend,' he said.
'People are disappointed that they're not getting the small cash bonus that they usually get at this time of the year.'
FULL STORY PAGE 13 AN INVESTMENT in Anglo Irish Bank that went wrong to the tune of €2.4 million is the reason why Wexford Credit Union is not paying a dividend this year, for the first time in its 48-year history.
The credit union must also write off €2.2 million in bad debts created by people who are unable to meet loan agreements after losing their jobs and falling into financial difficulty during the past year.
However, despite the bleak economic climate, savings increased during 2010, as many people tended to spend less out of fear for the future and others transferred savings from banks.
The decision not to pay a dividend to members this year, is a source of huge disappointment to the board, according to the manager Ultan Ryan who said shareholders are also understandably disappointed.
' The board are deeply disappointed. This is the first time in the credit union's history that it hasn't paid a dividend. People are disappointed that they're not getting the small cash bonus that they usually get at this time of the year', he said.
The dividend failure was caused by a major loss in an Anglo Irish Bank investment. In 2004, the credit union invested €2.9 million in the 'floating rate note'. When the bank was nationalised in January 2009, the Government gave a guarantee on investments by all deposit and bond holders but that guarantee was removed in October of this year.
The State-owned bank then offered the credit union only 20% of every Euro invested, resulting in a loss of over €2.3 million.
' That is approximately the value of the dividend we would pay in a given year', said Mr. Ryan.
The dividend is paid from the financial surplus at the end of the year but there is no surplus this year because of the Anglo debt and the need for an increased provision for loans turning into bad debts in the future due to the recession.
Wexford Credit Union had to write off €2.267 million in unpaid loans this year, a massive increase of 98% on last year when it wrote off €1.1 million. The figure represents 2.65% of outstanding loans of €85.7 million.
Debts are written off the balance sheet where there is a clear inability to repay but the accounts are still pursued through revised payment arrangements and legally, if necessary.
A total of 353,223 in previously written-off loans was recovered during 2010, an increase of 37% on 2009.
The number of people taking out loans in the credit union was down this year.
'People are very reluctant to take on debt in the current climate and the credit union is making sure that those who do, can afford to take it on.
Mr. Ryan reassured anyone who may be concerned about the safety of their savings. 'Even after absorbing these losses for the year, the credit union is fundamentally sound and secure', he said, adding that members' saving deposits are guaranteed under an EU/Government scheme.
' The credit union is operating as normal, lending to those people who can afford to take on loans and launching new services to help the Wexford community to recover and move forward,' he said.