Taxpayers will own 40pc stake in 'Third Force' bank
Issued : 10 September 2009
TAXPAYERS will end up owning over 40pc of a new bank to be formed through the merger of Permanent TSB, EBS and Irish Nationwide.
Sources said last night that Irish Life & Permanent (IL&P), owner of Permanent TSB, is likely to end up with a 40pc to 45pc stake in the new entity.
Irish Nationwide and EBS, which have over 500,000 members between them, would have a combined 10pc to 20pc stake between them.
Nationwide is set to transfer €7bn of its €10.4bn loan book to the National Asset Management Agency (NAMA) and EBS is expected to part with €700m to €800m of its €16.9bn portfolio.
Both will require significant capital injections from the State and sources said the State will end up with at least 40pc of the merged group as a result.
one source familiar with the Government's current thinking said: "This is not a done deal. A lot of negotiations still have to take place and it is likely to be into next year before there is a final shape on all of this."
The Irish Independent reported early last month that plans for a 'grand merger' between the country's three smallest lenders will top the Government's agenda as NAMA, designed to purge the banks of up to €90bn of developer loans, starts to take over the loans from the country's lenders.
Unveil
Sources said yesterday the issue has become more pressing as Finance Minister Brian Lenihan prepares to unveil the discounts banks will have to take on the €90bn of loans the 'bad bank' is taking over. This is likely to leave large holes in the balance sheets of the banks, requiring fresh capital injections.
Mr Lenihan has steeled his resolve in recent weeks that he will not shy away from taking majority ownership of Allied Irish Banks and Bank of Ireland as a result. He has not officially outlined his position on Irish Nationwide and EBS which plan to participate in NAMA.
Permanent TSB, part of IL&P, will not take part in the project as it avoided property development lending during the boom. But IL&P has made no secret of its ambition to hive off Permanent TSB, the country's biggest mortgage lender, whose weakness lies in the fact that it is by far the most reliant on volatile wholesale markets for its funding. Permanent TSB only has €1 on deposit for every €3 it has out to customers.
It is believed that IL&P initially wanted to get rid of Permanent TSB entirely. IL&P is currently in the process of overhauling its business structure to draw clear distinctions between the bank and the life units. The Government's new banking advisers, blue-blooded UK investment bank NM Rothschild, will take a lead on hammering out any transaction. The department declined to comment other than to say: "The minister will give a broad indication of the future of the sector and individual institutions on September 16."
Protect
A merger of the trio is likely to lead to significant job losses among their combined 3,500 employees.
Finance union IBOA general secretary Larry Broderick yesterday said: "A third banking force needs to be considered. Consolidation will impact on jobs." He added that the union will seek to "protect as many jobs as possible".
The three lenders will control about 38pc of the Irish mortgage market between them.
Joe Brennan
