Irish unit is 'key part' of bank, say management

MERGER IMPACT:SENIOR MANAGEMENT at Bank of Scotland (Ireland) and its Irish retail bank, Halifax, will be trying to impress upon their new bosses in the merged HBOS-Lloyds TSB entity over the coming months that it should be considered a key part of the bank and not sold off as a "non-core" asset.

Lloyds TSB acquired the Irish bank’s distressed owner, HBOS, UK’s biggest mortgage lender, in a €15 billion deal but reports suggested that it may put about €11 billion worth of assets up for sale.

It is too early to say how Lloyds will view the Irish unit and it’s likely to take months to familiarise themselves with the business.

Bank of Scotland (Ireland) has deposits of €8 billion and loans of €32 billion, which is minuscule in the context of the newly created bank.

HBOS-Lloyds TSB will have a combined loan book of €867 billion and deposits of €508 billion.

The very high loans-to-deposits ratio at the Irish bank won’t impress the new bosses from the outset, though the Irish bank will use its parent company’s newly created financial muscle as the biggest retail bank in Europe to sell to customers in a bid to attract more deposits to Halifax branches.

The merger has prevented a possible run on HBOS, creating stability and ensuring that the overall bank group’s deposit base is safe.

Lloyds avoided the international growth targeted by HBOS in recent years, concentrating instead on the British market.

It was, however, mentioned as a possible suitor for former Irish state banks, ICC and ACC, when they came on the market in 2001 and 2002 respectively. However, it opted to stay firmly focused on its domestic market.

Two years ago, Lloyds opened a small commercial lender called Commercial Finance Ireland, which has eight staff in Dublin.

But there is no real overlap between the Irish businesses of HBOS and Lloyds, so there are no criss-crossing Irish jobs to cut.

However, Davy stockbrokers questioned in a research note yesterday whether the new owner of HBOS would be less committed to Ireland and its customers in the building sector in the coming year.

“Possibly,” said Davy analyst Scott Rankin, “the new group will have far bigger priorities in the immediate term though.”