December vote for IL&P on possible bank spin-off plans
Thursday November 05 2009
Irish Life & Permanent has set December 17 as the date for an extraordinary general vote on its plans to create a new holding company, seen as paving the way for plans to spin off its weak banking unit as the sector consolidates over the next year or so.
While the bank has been eyeing participation in a three-way merger with EBS and Irish Nationwide, government sources have indicated that the Department of Finance would be happy to instead see a bilateral merger between the two building societies.
Preliminary talks have begun in recent weeks between EBS and Nationwide under the watchful eye of the Government. The State is expected to pump a combined €1.5bn into the duo to shore up their balance sheets as a result of writedowns on loans heading over to the National Asset Management Agency (NAMA). Still, financial sources believe the Government will find it difficult to get the go-ahead from the European Commission for just a two-way deal. Lenders in receipt of state aid must prove to Brussels that they have a viable future.
Industry observers said this could prove particularly difficult in the case of a tie-up of EBS and Nationwide.
Some have pointed out that the Government, in keeping Permanent TSB out of the picture at this stage, may just be looking to strengthen its bargaining position ahead of possible talks with the bank next year.
Others believe the Government may be seeking to attract a foreign-owned bank with a strong business lending franchise into the mix. The combination of Permanent TSB, EBS and Irish Nationwide would, under their current business models, amount to little more than a mortgage lender, after the latter two's commercial property loans are taken over by NAMA.
- Joe Brennan
Irish Independent
