IRISH NATIONWIDE may need more capital on top of the €2.7 billion pledged by the Government if higher losses are incurred on loans moving to the National Asset Management Agency (Nama), according to the building society.

At Irish Nationwide’s annual meeting in Dublin yesterday, chairman Danny Kitchen said the building society had an excess of capital following the promise of €2.7 billion from the Government.

If future losses incurred on Nama-bound loans were higher than the 58 per cent discount on the first €670 million transferred, the society may need more capital. “If we continue to make losses, that will be necessary.”

Mr Kitchen said he did not know the discount likely on the remaining €8 billion in loans moving to Nama, as they were valued individually.

“It is reasonable to assume there are going to be further losses with the transfer of loans,” he said.

Irish Nationwide will transfer €2.5 billion in the second tranche of loans being sold to Nama, and €1 billion in the third tranche.

The €2.5 billion loss incurred in 2009 reflected an “abysmal performance”, said Mr Kitchen. “I don’t think it is an understatement to say that the losses are truly shocking, particularly in an undertaking the size of Irish Nationwide,” he told members.

Irish Nationwide departed from its traditional savings and loans model, he said, and significantly increased its lending into commercial property in 2005 and 2006.

“The model was essentially the function of a bull market,” he said.

Brendan Burgess, a long-time critic of the building society under former chief executive Michael Fingleton, said the society had failed. There was “no reason for Irish Nationwide to be propped up” and it should be wound down.

Mr Kitchen said a winding-down was one option that had to be assessed under the restructuring plan to be submitted to the European Commission by the end of June as a condition of State aid.

“It is a terribly easy thing to say just wind it down – if you try to wind down a loan book, the debtors head to the hills,” he said.

Management would seek to return the society to profitability, he said, and it may have a role as a mortgage lender as foreign banks withdraw from Ireland.

“I do think there is a gap; it is a question of whether we can exploit that gap,” he said.

The Minister for Finance, who effectively controls Irish Nationwide, had said he wished to sell the building society, but Mr Kitchen said that Irish Nationwide was “not saleable” at the moment.

Irish Nationwide was not in merger talks with rival building society EBS, he said, dismissing a possible marriage of the two, saying he did not believe Brussels would support the move.

“I am not convinced that it actually solves anything. You just end up with a slightly bigger building society,” he said.

In an unusual move, Irish Nationwide members voted against receiving the auditors’ report from KPMG. Mr Kitchen said the vote had “no relevance”.

Mr Burgess said it showed “a lack of confidence in the board and the auditors”.

Members later voted to reappoint KPMG as independent auditors to the society.

KPMG partner Jonathan Lew told members the firm submitted reports about issues on controls and commercial lending at Irish Nationwide to its board and to the Financial Regulator.

Mr Kitchen said the building society would put the audit out to tender, given the corporate governance issues that had arisen.

Irish Nationwide has referred to the Garda a possible fraud involving the misappropriation of funds by a lower-ranking staff member.

Mr Kitchen said the sum involved was “not significant”, adding that it was “not millions”.