Bank of Ireland is carefully considering how it will spend its surplus capital but it will not be hurried into making an acquisition, according to group chief executive, Mr Maurice Keane. The bank can now use some of its surplus funds to buy-back some of its shares in the stock market and may move before year-end. Mr Keane said any share buy-back was likely to happen in 1999 rather than 2000.

"We have shown in the past that we can sit on surplus capital for a while until the right opportunity comes along, but equally we can't sit on it for too long," he said.

Mr Keane said fund managers were divided on whether the bank should exercise its power to buy its own shares, with those closer to the US more supportive of this action than their European counterparts.

The bank's primary focus for expansion is Britain but it is also expected to be a front runner in the race to buy the State-owned ICC Bank and is looking for acquisitions in Northern Ireland.

Mr Keane said the bank must learn from the failed merger talks with the Alliance & Leicester but remained convinced it could have been a good deal for Bank of Ireland shareholders.

"If there is an opportunity to generate significant stockholder benefit from a corporate transaction, we would certainly look at that in a wiser way as a result of recent experiences." Mr Keane said the Alliance & Leicester merger proposal was "adventurous" and difficult and that maybe the bank should have sought to tie up a lot of the fundamental aspects of the deal much earlier in the negotiations.

In the Republic, the bank is poised to consider carefully the tender documentation on ICC Bank when it is issued by the Government. Mr Keane says ICC offers the bank the best opportunity to expand its small business banking operations here. If successful, Bank of Ireland would keep the ICC brand and preserve its key features.