Monday 18 December 2017

AIB tells the Government it would not be happy with TSB merger

Laura Noonan

Laura Noonan

STATE-owned AIB has told the Department of Finance that it does not favour taking over Permanent TSB, which the Government is considering merging with another institution.

Sources last night confirmed that AIB had delivered the message over the weekend after Finance Minister Michael Noonan hinted last Thursday that Permanent TSB might not have a standalone future.

AIB, which has already taken over EBS, was described by sources close to the decision-making process as "an obvious candidate" to absorb its mortgage and savings business.

It is understood, however, that bosses at AIB have delivered a cool response to the prospect.

AIB is already undertaking a restructuring effort that will see more than 2,000 staff cut, while the EBS has not yet been fully integrated. This raises questions about AIB's capacity to complete another merger.

Harder

Taking on Permanent TSB could also make it harder for AIB to hit the Central Bank's loan-to-deposit targets.

AIB, and all the bailed-out banks, have to have a maximum of €122.50 on loan for every €100 on deposit by the end of 2013.

AIB's last reported 'loan-to-deposit ratio' was 143pc (or €143 on loan for every €100 deposit). Permanent TSB's was 227pc.

Permanent TSB would also come with the challenges of an inherently unprofitable tracker mortgage book.

A spokesman for the department declined to comment on any conversations with AIB, but said officials "continue to explore all options".

Other sources, however, suggested that efforts are concentrating on finding a "non-AIB solution". The most likely outcome is that Permanent TSB's tracker mortgages will be "warehoused" in a separate vehicle, leaving a small, healthy bank.

The Government will have to convince the European competition authorities that this new, smaller bank has a viable future.

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