Small retail bank grew quickly but ultimately succumbed to scandal

NIB history: The purchase of National Irish Bank (NIB) by Danske will see the Republic's smallest retail and business bank changing hands for the second time in its 26-year history.

The bank began life in 1978 as Midland Montague Leasing (Ireland), a subsidiary of UK-based Midland Bank.

It changed its name to Northern Bank (Ireland) in 1986 and took over the business of Belfast-based Northern Bank in the Republic.

In 1987, both Northern Bank (Ireland) and Northern in Belfast were sold as part of a deal that saw National Australia Bank (NAB) take over four Midland Banks in Britain and Ireland for £390 million sterling.

This saw the birth of National Irish Bank and heralded a period of furious growth for the business in the Republic.

At the head of this was Mr Jim Lacey, a chief executive whose high public profile memorably brought him to the attention of kidnappers in late 1993.

Mr Lacey was known for NIB's concentration on luring in new custom through innovations in areas such as lower interest rates.

The bank also launched a resonating advertising campaign involving Martin, the fictitious NIB manager who made repeated calls to his cousin Niall about the fine deals the bank was offering.

NIB at this point had about 5 per cent of the overall market and was growing its branch network aggressively. At one stage, it opened five new outlets within a seven-month period and was known for being both confident and opportunistic.

Acquisitions were constantly mooted, with TSB to become the most likely target. A move on the bank failed in 1991 however and, in retrospect, this seemed to mark the beginning of NAB's loss of interest in its Irish project.

The numbers at the time remained positive for NIB, despite the TSB failure.

By 1993, the bank was posting pre-tax profits of £14.6 million, having consistently posted double-digit annual growth. It had 57 branches and employed about 800 people.

The performance did little for Mr Lacey's career however and his position was abruptly terminated in 1994 when his immediate boss arrived in from London to give him the sack.

No reasons for the move were given, but it was accepted that NAB's plans to centralise its UK and Irish administration and cut costs may have caused difficulties. Bad debts were also a problem, with NIB's rapid growth coming at a time while judgments against customers were also rising.

And more bad news was just around the corner. In 1998, RTÉ television reported that NIB had been helping its customers to evade tax by inviting them to invest in Clerical Medical International (CMI) life assurance schemes. It was also alleged, and subsequently proved, that the bank had been "loading" interest rate charges on its customers without their knowledge or without any good reason.

The allegations also focused on higher fees charged needlessly at some branches.

One of the NIB executives criticised in the subsequent High Court Inspectors' Report into these matter was Mayo TD Ms Beverley Flynn. Ms Flynn sued RTÉ for libel but lost her case.

After Mr Lacey's departure, chief executives changed rather quickly at NIB, with two appointed within two years.

The RTÉ allegations had harmed the bank's reputation beyond repair for many customers and, despite NAB retaining its shareholding in NIB, the Australian group failed to offer the financial support that would have been necessary for growth.

High Court inspectors were appointed to the bank in 1998, and their investigation continued until this summer when they reported their damaging findings.

In the meantime, hundreds of NIB customers made settlements with the Revenue Commissioners, with NIB offering to pay part of the settlement in return for a commitment not to sue. The bank has continued to issue refunds for overcharging.

NIB's market share is now thought to have fallen below the 5 per cent it once had, although Northern remains a strong franchise in the North where it is the largest retail bank.