Anglo may become part of 'third force' in banking, says Dukes

STATE-OWNED Anglo Irish Bank may become part of the so-called “third force” in Irish banking to rival the country’s two main banks, according to Alan Dukes, a board member of the bank.

Mr Dukes said all options were being considered following Anglo’s plans to split into a good bank and bad bank.

“Everything is on the table,” he said. “There is a view that we would turn it into a business bank and that it could form something with other institutions.”

The bank first had to sell its development loans to the National Asset Management Agency (Nama) he said, and then stabilise its operations before proceeding with plans to divide the business into a good bank/bad bank.

The European Commission must approve the bank’s restructuring plan under State aid rules following Anglo’s €4 billion bailout by the Government. The commission is expected to rule on the plan by the middle of this year.

The banking sector is set to undergo its most significant reshaping following Nama’s purchase of €80 billion in loans from five banks as some lenders shrink in size and partake in mergers aimed at strengthening them.

Irish Nationwide, which is transferring 80 per cent of its €10 billion loan book into Nama, is in talks to be taken over by EBS building society, which is transferring about 5 per cent of its loans.

Irish Life & Permanent (IL&P) is pushing to off-load its loss-making bank, Permanent TSB, in the consolidation of the sector. The company said this week that it planned to raise up to €600 million for the bank in advance of any potential merger.

David McCarthy, finance director of IL&P, raised the possibility this week that the bank could merge with Anglo or Ulster Bank.

EBS and Permanent TSB previously held merger talks and a tie-up of the two lenders with Irish Nationwide has been widely mooted as creating a “third force”, though it would be exclusively a savings and home loans business.

Merging Permanent TSB and Anglo could create a more full service bank, including a business arm, serving as a more viable “third force” alternative to AIB and Bank of Ireland. Ulster Bank is the third largest full service bank in the country.