AIB to radically overhaul its investment business

AIB declined to comment on media reports yesterday, that the bank was on the point of announcing major changes to its investment businesses.

The bank is understood to be examining options to strengthen its position in the lucrative life and pensions market, where its Ark Life assurance subsidiary has reported mixed performance in recent years.

Options open to the bank include buying a competitor, or entering into a strategic alliance over the distribution of products. The bank is also believed to be considering the sale of Govett, its British investment arm.

The bank said its policy was not to comment on speculation. Industry analysts, however, say that neither the acquisition of an Irish business, nor the sale of Govett, would come as a surprise.

“The life assurance and funds management businesses are in some way related, and they’ve been the two underperformers in the group,” said Scott Rankin, an analyst with Davy stockbrokers.

Mr Rankin said Govett, which AIB bought in 1995 for £100 million (€165 million), failed to match AIB's expectations. Govett suffered from its exposure to Far Eastern markets, that performed poorly in the years following its acquisition.

Reports have linked AIB with both Hibernian, and Eagle Star's Irish operations.

Eagle Star has been the subject of repeated speculation as a result of increasing pressure on its parent, the Swiss-based Zurich Financial Services group, to dispose of non-core assets to improve its financial position. Zurich has been involved in an extensive programme of disposals in recent months.

Market analysts said Ark Life was weaker than its competitors, and that AIB would benefit from a broader product range, and better access to distribution channels, such as brokers. AIB management has said in the past that there was a need to grow its investments business organically, or by acquisition.