Speculation on Australian bid for B of I

The appointment of National Australia Bank (NAB) executive Mr Michael Soden as chief executive designate at Bank of Ireland has sparked widespread speculation in Australian financial circles that NAB may be about to make a bid for the Irish company, or seek to merge with it.

NAB has been one of the star performers on the Australian stock market in recent times and has made no secret of the fact that it is seeking opportunities to expand further into foreign markets, particularly in the UK.

Many Australian financial analysts quoted in the Australian press yesterday believe Bank of Ireland would be a perfect fit for NAB in that the Irish group's operations in the UK would provide a platform for NAB to gain market share in that market - as it has sought to do for more than a year.

The influential Australian Financial Review newspaper said some in the Australian market believed NAB may already have begun work on a possible deal with Bank of Ireland, which refused to comment yesterday on the speculation.

The Sydney Morning Herald said Bank of Ireland's main attraction to NAB was the Irish company's "funds-management business, with some $100 million [Australian dollars] in assets under management and a smallish UK banking presence in the south-west through Bristol & West Building Society".

London financial house JBWere, in a report published this week, identified Bank of Ireland as NAB's second most likely merger target, behind UK firm Alliance & Leicester. As a result of that, Dublin born Mr Soden's surprise appointment on Thursday to the top job at the Irish bank is seen by some as a precursor to a friendly takeover or merger bid by the Australians.

NAB already has considerable interests in Ireland. It owns the largest bank in Northern Ireland, Northern Bank, and also operates the National Irish Bank in the Republic.

The JBWere report noted that while the bulk of Bank of Ireland's operations were concentrated in Ireland, it had strong international wholesale banking and funds management arms that would complement NAB's existing operations in Europe and around the world.

JBWere's banking analyst, Mr Alistair Hunter, said that while the Irish bank's branding strategy may not be compatible with the NAB culture, the Irish group's diversified income streams and asset management capabilities were seen as big attractions for NAB.

A large portion of Bank of Ireland's UK earnings is generated by its Bristol & West banking subsidiary, which is focused on the lucrative south of England.

NAB has recently been linked with a possible 10 billion Australian dollars (€6.1 billion) takeover of the Alliance & Leicester building society and it is being suggested that if that deal does not materialise, it may turn its attention to Bank of Ireland.

Bank of Ireland also attempted a merger with Alliance & Leicester in the past but that deal collapsed.

NAB's share price has rocketed in recent months. It is the largest bank in Australia and is prevented by legislation from merging with or buying another big Australian bank. The company recently announced a record Aus$2.2 billion interim profit.