Parent may put troubled bank up for sale

NIB's futureNational Irish Bank's (NIB) 700 staff will be feeling increasingly insecure about their future as speculation about the sale of the bank will mount in the wake of the High Court inspectors' report.

There have been rumblings for many months now that the bank would be put on the block as soon as this sorry chapter was closed, and many investors are expecting a statement from its parent, National Australia Bank (NAB), in September to clarify the position.

In recent months NAB's chief executive, Mr John Stewart, has gone on the record saying that he would sell its British and Irish bank if he thought it would create value for its shareholders. He subsequently seemed to try to appease staff concerns by saying that he believed NAB should focus on "repairing" its British and Irish banks rather than selling them for now.

But as the days and months pass there is a distinct feeling that Mr Stewart is a seller. Yesterday NIB chief executive Mr Don Price refused to comment on a possible sale.

NIB is a relatively small financial institution. It has captured no more than a 3 per cent share of the Irish banking market and would not be viewed as a significant acquisition for a rival. One analyst suggested the bank wouldn't be viewed as "a trophy asset" for any of the main players.

Bank of Ireland and AIB might take a look at it but would run into serious problems with the Competition Authority if they were to try to add NIB to their Irish operations. Bank of Ireland may also look at NAB's Northern Ireland operation, Northern Bank.

Irish Life & Permanent is the most likely of the Irish financial institutions to think seriously about merging NIB into its business. The banking and assurance group has been expanding its presence and has almost completed the integration of the former State-owned bank, TSB, into the group.

NIB's branch network would prove attractive to Irish Life & Permanent and may prove a better fit for the group than, for instance, the Irish Nationwide building society, which is already effectively on the market.

The two big Scottish banks, Royal Bank of Scotland, which owns Ulster Bank and First Active, and Halifax Bank of Scotland which trades in the Republic as Bank of Scotland Ireland, would no doubt run the rule over NIB, although its attractions would appear fairly limited.

On the face of it NIB would seem to hold greater attraction for HBOS, which has signalled its desire to expand its presence in the Irish market.

Its plans to become a fully-fledged retail bank in this market have been well flagged, although it has said it intends to offer products such as current accounts over the phone and the internet rather than through a branch network.

Royal Bank is still busy digesting First Active. That acquisition gave the group a 12 per cent share of the lucrative Irish mortgage market and it is more difficult to see what NIB would bring to its Irish activities.

Of course if NIB was sold as part of a lot that included NAB's entire UK operations, which also include Northern Bank, Clydesdale Bank in Scotland and Yorkshire Bank in England, the Scots would be amongst the contenders.