IRISH LIFE & Permanent (IL&P) moved a step closer to participating in the anticipated consolidation of the banking sector as shareholders approved a new corporate structure.
The change paves the way for IL&P’s disposal of its loss-making banking division, Permanent TSB.
Investors voted overwhelmingly for the restructuring at an extraordinary general meeting in Dublin.
The creation of a new holding company gives IL&P flexibility to include Permanent TSB in any new financial services group. Shares in IL&P fell 1.6 per cent, or five cent, to €3.12, valuing the bancassurance group at €863 million.
The State’s two building societies, EBS and Irish Nationwide, started discussions on a potential merger last month at the instigation of the Minister for Finance.
ILP is expected to press the Government to include Permanent TSB in the so-called “third force” to rival AIB and Bank of Ireland once the merger of the two building societies is completed.
“There is a clear consensus now that we are likely to see significant consolidation within the financial services industry,” said IL&P chairwoman Gillian Bowler.
“As one of the most significant players in that market, it’s very important that we can participate fully in any such process.”
She refused to be drawn on the potential shape of consolidation or specifically on possible mergers.
IL&P had “begun discussions with the Government and others on the next steps in the development of the banking sector”, she said. Discussions centred on “some sort of third force”, which had “many possible shapes”, and “that is certainly one of the possibilities that we will examine”.
Ms Bowler said IL&P’s corporate structure was inflexible and restrictive, and the changes would help the group “make strategic investments quickly and flexibly”.
Emer Lang, analyst at Davy stockbrokers, said the restructuring was “the first stage in a process that may ultimately see IL&P put its challenged bank into the mooted third force in return for a stake in the enlarged entity”.
Ms Bowler said the company did not require State capital.
“We are not out of the woods yet; we are making good progress on stabilising our operations. The next 18 to 24 months are critical, but I believe we can emerge strongly over that time.”
IL&P chief executive Kevin Murphy said the group would be one of the first banks to raise long-term funding under the Government’s extended guarantee. It planned to raise $2 billion (€1.4 billion) selling three-year State-guaranteed bonds in January.
An IL&P spokesman said the group had recovered €15 million, or 16 per cent, of a €92 million debt written off last year on an investment in the failed Icelandic banks by selling the debt on to a third party. It was “a reasonable recovery in the circumstances”.
