Consolidation will be a major theme this year
With a merger between EBS and Irish Nationwide expected in the first quarter of the year, the focus is set to turn to other lenders that may participate in consolidation of second-tier lenders.
Irish Life & Permanent is keen to push its banking arm into a 'super merger', having recently voted through an overhaul of its corporate structure, making it easier to spin off Permanent TSB.
Government sources have emitted signals that Permo may be left out in the cold.
But a combined EBS/Nationwide, which will receive up to €2.4bn in State aid, may find it hard to convince Brussels it will have a viable future on its own.
Even a combination of all three poses its difficulties, unless the new group was able to come up with a credible plan to diversify away from home loans.
Bank of Scotland (Ireland), part of Lloyds Banking Group, has made overtures to participate in a deal.
But its massive loan-to-deposit (LTD) ratio, which stood at 486pc at the end of last year, would be a drag.
As things stand, the combined Permanent TSB, EBS and Nationwide's LTD ratio, after NAMA, would top 180pc -- well above the 100-125pc range that the financial markets are demanding in the new banking world.