NIB sale decision in new year

THE future of National Irish Bank (NIB) will not be decided until the new year, the troubled bank's Australian parent said yesterday.

National Australia Bank (NAB) chief executive John Stewart said the bank had received several expressions of interest in NIB and Northern Bank, its sister operation in the North but that a decision on whether to sell the banks would be deferred until after Christmas.

"We have received initial expressions of interest and we expect to make a decision on the future of these Irish banks over the next few months," said Mr Stewart.

NAB is believed to be looking for more than €1 billion for the two banks, which it hopes to sell as a combined package.

It has hired investment bank Lazard to advise it on the sales process.

British banking giant Halifax Bank of Scotland (HBOS) is the front-runner to take over the banks if NAB proceeds with the sale.

HBOS is already active in Ireland through Bank of Scotland (Ireland), a specialist business bank, and a direct sales operation that targets the residential mortgage market here. Other contenders are fellow British bank Lloyds TSB and Dutch lender Rabobank, which already owns ACC Bank as well as treasury and leasing businesses in Dublin's IFSC, but their interest is understood to have waned in recent days.

Some potential bidders, who would otherwise have run an eye over either NIB or Northern as separate deals, have been discouraged by NAB's preference for a combined sale. Both banks' information technology (IT) systems are also believed to be in need of significant investment, making them less attractive.

NAB also announced a 20% fall in net profits for the full year yesterday, which Mr Stewart said was "poor and unacceptable".

Net profits tumbled to A$3.2 billion (€1.9 billion), well below market expectations of A$3.8 billion.

The bank was rocked by a €220 million foreign exchange rogue trading scandal earlier this year, which resulted in a purge of the organisation's top executives that saw the boardroom almost completely emptied and replaced with new faces.

But Mr Stewart said NAB's problems went beyond the foreign exchange losses and signalled a need to repair the bank's internal procedures. "The two key drivers of the overall result were flat revenue and unsustainable cost growth," he said.

NIB employs about 700 people in 59 branches and 12 business centres, but has less than 5% share of the Irish market.

The bank has mirrored its parent's difficulties with local problems of its own in recent years, including investigations into the sale of offshore investment products and overcharging certain customers.

NAB's other operations in Europe, the British-based Clydesdale and Yorkshire banks, are expected to remain within the group for the foreseeable future. The bank has announced plans to merge the two into a single legal entity.