Irish Life & Permanent, Ireland's biggest mortgage lender, should sell its United Kingdom business to improve its "overstretched" funding profile, Merrion Stockbrokers said today.
Dublin-based IL&P's UK unit has a loan book of €8 billion, Merrion analyst Sebastian Orsi said in a research note today.
"The longer the credit crunch lasts the more it exposes a structural weakness in banks' over-reliance on wholesale funding," Mr Orsi said, adding that selling the UK unit would "partially address the imbalance" at IL&P.
IL&P, which said on May 23rd it was "confident" about meeting its funding needs, gets about two-thirds of its funding from the wholesale money markets.
On May 1st, the company lowered its operating-profit forecast as the credit-market turbulence pushed the cost of money higher.
"There is no new information in this report,'' Ray Gordon, a spokesman for the company, said this morning. "We have repeatedly stated our confidence in our funding position for this year, and again as recently as two weeks ago. That remains our position."
IL&P shares fell 1.6 per cent to €10.09 at 9.24am in Dublin trading.
The shares have fallen by 47 per cent over the last year, giving the company a market value of €2.7 billion.