Irish Life & Permanent (IL&P) has suspended the sale process for its £6.8 billion UK loan book amid talks between the Government and its EU-IMF lenders over the future of the bancassurer, a source close to the company said today.

It has also scrapped the sale of its €500 million sub-prime mortgage book, the source said.

The Government wants to split IL&P's struggling banking arm, Permanent tsb, from its life insurance arm. But the sale of the insurance business had to be shelved late last year after market turmoil put off prospective buyers.

The future of Permanent tsb is currently being debated by Dublin and its EU-IMF lenders and Minister for Finance  Michael Noonan said in January a decision on its future would be made by the end of April.

Mr Noonan indicated that winding down Permanent tsb was not on the cards, with its sale or merger with a larger bank a more likely option.

IL&P ultimately has little choice but to continue with extensive deleveraging due to a loan-to-deposit ratio of over 200 per cent, said Eamonn Hughes, an analyst with Goodbody Stockbrokers.

A spokesman for Irish Life declined to comment on the planned sale of the UK and sub-prime mortgage loan books.

Reuters