NAB may select an exclusive bidder for Irish banks

The race to take over National Irish Bank (NIB) and Northern Bank could see one bidder enter into exclusive negotiations with National Australia Bank (NAB)during the next week.

Market sources said yesterday that NAB had indicated that its preferred option was to hammer out a deal with one party only.

The alternative to this would be to negotiate with a number of bidders at the same time with a view to generating the highest possible price at the end.

Entering into exclusive talks would automatically give the remaining bidder a preferred status.

Market expectations were growing yesterday that both Lloyds TSB and Halifax Bank of Scotland (HBOS) would be making first-round bids of almost €2 billion this week.

HBOS already owns Bank of Scotland (Ireland) and is known to have an interest in expanding its Irish presence.

Lloyds TSB has no involvement in Ireland at present, but was previously owner of TSB in the North before it was purchased by AIB.

NAB, Australia's biggest bank, said last month it had had "several expressions of interest" for its Belfast-based Northern Bank and NIB but would hang on to them unless it got the right price.

Time pressure on NAB is thought to be growing this week, however, with chief executive Mr John Stewart expected to report some progress to investors when NAB reports results on November 10th.

"There is probably quite a lot of pressure on him internally to have something to say by then," said one commentator yesterday.

It is possible that Mr Stewart may at that stage announce a preferred bidder, although this is not certain.

"The potential embarrassment of the chief executive on November 10th is only one factor," a market-watcher said.

Potential bidders have been studying an information memorandum on NIB and Northern for a number of weeks but have not had access to the banks' most detailed financial information.

If NAB entered into exclusive negotiations with one party, only this bidder would be able to access the data for a fixed period of time. The bidder would then decide whether to make a formal offer or leave the process entirely.

Lloyds TSB declined to comment on the matter yesterday, with HBOS similarly tight-lipped.

Analysts estimate Northern, with 95 branches, could fetch €1.3 to €1.5 billion, while NIB's network of 59 branches in the Republic looks to be worth €300 to €400 million.

Barclays, Mr Stewart's former employer, has also been cited as a possible interested party although the market has been discounting this.

Additional reporting: Reuters