Anglo and INBS ‘to start talks’ on merging sections

ANGLO Irish Bank and Irish Nationwide Building Society will start talks with Government officials this week to decide which parts of the state-controlled lenders may be merged following the country’s bailout, two people with knowledge of the discussions said.

Anglo Irish chief executive officer Mike Aynsley met with Gerry McGinn, his counterpart at Irish Nationwide, to start exploring options last week, said the people, who declined to be identified because the talks are private. The Government has told both companies to devise a plan by the end of January, said the people.

The talks mark the Government’s first step to meeting the pledge it made to shrink the country’s banking industry when it accepted an €85 billion international aid package. Finance Minister Brian Lenihan estimated rescuing both lenders could be as much as €39.7bn.

“Merging the remaining businesses makes sense from an operational point of view as it pools resources and can generate some cost efficiencies,” said Stephen Lyons, an analyst Davy.

The Government might merge a unit of Irish Nationwide that oversees loans being transferring to National Asset Management Agency with a similar division at Anglo said one of the people.

Irish Nationwide has about €500m of commercial property loans that may also be combined with Anglo, the person added.

Irish Nationwide will also review options for its residential mortgage unit, which has about €2bn of loans and continues to extend new credit, one of the people said. Officials at Irish Nationwide, Anglo, the Department of Finance and NAMA, which is representing the Government in talks with the banks, declined to comment.

The restructuring of both banks “will be swiftly completed and submitted for EU state-aid approval,” the Government said on November 28 as it announced the bailout. Anglo will cease to exist in name within months as the lender is wound down over a number of years.

Anglo Irish chairman Alan Dukes said on November 30 it is “conceivable” that the lender’s assets will be merged with those of Irish Nationwide as their restructuring is completed.

Central Bank governor Patrick Honohan said the deposits of both lenders will be transferred to other lenders. That may leave the lenders dependent on funding from the European Central Bank and the Central Bank, Lyons said.