EBS merger talks ‘within weeks’

THE battle for control of EBS Building Society has moved up a notch. Irish Life & Permanent has emerged as a potential buyer.

EBS is already in preliminary discussions with Cardinal Asset Management about a private investment deal that would put an end to its mutual status, its boss Fergus Murphy said after the group’s recent AGM.

Yesterday’s confirmation that EBS will shortly engage in parallel talks with IL&P has given the merger new momentum.

When the bank crisis erupted it was speculated IL&P could form a new third bank through a merger with EBS and Irish Nationwide. Their limited product range would prevent the new bank however, from taking on AIB and Bank of Ireland in the retail and commercial banking sectors, so they would not constitute a third force in the true sense of the word.

In a statement the group confirmed talks will begin with EBS within weeks.

Earlier EBS informed the stock market it was broadening its discussions with a view to raising private capital to include “other potential interested parties”.

IL&P did not need state funding following the banking collapse because it was not involved in commercial property lending like the other financial institutions.

It was caught up in the crisis however and its three former top executives, including chief executive Denis Casey, were forced to resign after it emerged it had lent Anglo Irish Bank more than €7 billion on a short-term basis to make its balance sheet look better than it was at the end of its 2008 financial year.

That matter is under investigation by the Gardaí and the Director of Corporate Enforcement.

With discussion surrounding the future of the EBS still at the early stages, it is far from clear where these talks are heading.

At the time of the AGM a few weeks ago, Cardinal, with the support of New York equity group, JC Flowers, was the only suitor in town and even at that stage the talks had made little substantial progress since the initial contact some months ago.

The idea of a Third Force in Irish banking got derailed after the EU said it was not keen on two state-backed banks such as EBS and Irish Nationwide merging.

With Irish Nationwide’s future in the balance, IL&P and EBS will now open discussion to see if they have the basis to put some kind of a third banking operation in place.

In March the Department of Finance gave the EBS the green light to seek outside private funding, to help offset the €875 million it needs in fresh capital to offset the losses incurred by the transfer of bad property loans to NAMA and to bring its Tier 1 ratio up to 8%. EBS was cleared recently by the EU to accept €875m in state aid, which it may not need if the current discussions prove successful.