What the former mutual building society, First Active, needs is to map a clear route forward in an increasingly difficult and rapidly changing market where several other institutions are also experiencing tighter margins.

At the same time the bank needs decisive and effective leadership to implement its strategy.

With competition from low-cost external financial institutions likely to intensify and new forms of banking including Internet delivery developing rapidly, profits from traditional mortgage lending and deposit-taking businesses will continue to contract.

First Active is not alone in needing a sound strategic plan to protect profits and produce growth in the rapidly changing financial services market. Profits at building societies such as EBS and Irish Nationwide and the small banks with relatively narrow business bases such as ACC and TSB are now under pressure.

In developing a strategic plan First Active needs to decide how to broaden its business base to develop new sources of profits, whether it should concentrate on developing a strong niche market position and whether it should develop a strong Internet banking position. An important issue for the board to consider is whether, or perhaps how quickly, the bank must find a strategic partner to bring scale and business breadth to the operation.

Views in the industry are mixed about First Active's future. They range from the few who consider that with an appropriate strategic plan and effective leadership, the bank could manage itself out of its current crisis. This view considers the bank could then later negotiate a strategic alliance from a stronger position. At the other end of the spectrum is the view that First Active's life as a standalone bank is limited and it must now move swiftly to find a partner in the financial services sector.

Proponents of the former view argue that First Active's cost-cutting programme taken with the growth in the overall mortgage market, its expansion into higher margin areas such as car loans and its experience in mortgage securitisation should enable it to compete effectively in the changing market. The argument goes that if the bank is doing sufficient business and funding it cost effectively that is a sound strategy.

The second view sees relatively small banks with narrow business bases as extremely vulnerable in a constantly changing market. It sees a need to increase significantly the business base to add higher margin products. To succeed in this scenario First Active would need to find a partner.

But the bank would now be looking for a partner from a relatively weak position. While it has a strong deposit base and a large loan book, its structural problems and weak share price would put it at a disadvantage in negotiations.

Possible domestic partners include Irish Life & Permanent, TSB, Friends First and EBS. But most potential partners are likely to want to wait and see for a while and some may not be interested in a deal at any price. (The five-year bar on holdings of more than 15 per cent in a converted mutual would complicate the issue but is unlikely to be insurmountable.)

Another possible option for First Active could be expansion into business banking. The bank could approach the Government with a proposal to take over ICC Bank - a deal which would expand First Active's business base.

Whatever the outcome, however, the long-suffering First Active shareholders are unlikely to see any quick fix.