IL&P ponders shake-up to unlock the value in life unit
Wednesday April 15 2009
Irish Life & Permanent (IL&P) is understood to be considering a restructuring of its business which could pave the way for a spin-off of its weak banking unit in a bid to unlock value in the life assurance business.
The merger of Irish Life and Irish Permanent 10 years ago this month was structured in a way where the bank changed its name to IL&P. Irish Life, while being by far the bigger of the two businesses, became a subsidiary of the group.
It is believed the bancassurer is now looking at turning IL&P into a holding company, with the life, banking and asset management unit, Irish Life Investment Managers, separated into three distinct operating companies.
It is among a number of scenarios being considered by IL&P as it jockeys for position within the fast-changing banking landscape.
Anchor
IL&P first moved late last year to anchor itself as a 'third force' in the financial services sector through talks to take over EBS building society.
Those negotiations have stalled since the group lost its chief executive, Denis Casey, and two other top figures in February over its role in the deposits scandal at Anglo Irish Bank. Analysts, such as NCB Stockbrokers, have also raised the possibility of a 'super mutual' building society being created through the merger of both groups and Irish Nationwide, which is set to be shrunk severely as most of its troubled property assets are taken over by the new National Asset Management Agency.
But sources said a restructuring of IL&P could make it easier for the underperforming Permanent TSB arm to be split out from the group to participate in the much-heralded super-mutual.
The creation of such a group would require the blessing of the Government and, most likely, a state capital injection.
A spokesman declined to comment, other than to say: "We will continually reflect on our options, going forward. We don't speculate on what those options may or may not include."
Analysts have pointed out that a de-merger could help investors see how the Irish Life business is being severely undervalued by the market. They it would be impossible to envisage a standalone future for the bank.
Having avoided lending to the now-collapsed property development market, IL&P is set to be the only one of the six main lenders covered by the guarantee scheme that will not have to use NAMA to dump risky loans.
Reliant
However, it is by far the most reliant Irish bank on the wholesale debt markets, with a loan-to-deposits (LTD) ratio of 274pc -- meaning that for every €1 it has on deposit, it has €2.74 on loan.
Although a de-merger could prompt a market re-rating of Irish Life, the fear is that it could end up as a "sitting duck" for another group looking to take over the biggest life player in the market.
- Joe Brennan
