A merger between Irish Life and Irish Permanent will be positive for the former building society's future credit ratings, according to international ratings agency Moody's.

While the merger will require the approval of shareholders, the Government and the regulatory authorities, the agency states that such a merger could in time improve Irish Permanent's credit worthiness as it would offer the bank new cross-selling opportunities, most notably in bancassurance. "Following a merger, the new entity would attain more sizeable market shares in the sale of retail financial products, thereby strengthening Irish Permanent's competitive position in the highly consolidated Irish banking system. In addition, some postmerger economies of scale may also arise," according to Moody's. If the combined Irish Life/Irish Permanent were to achieve an improved credit rating, it would allow them to borrow funds in the market at more competitive rates.

Moody's assessment comes days after the other leading international ratings agency, Standard & Poor's, announced it may cut Irish Life's rating following the announcement of merger talks. Standard & Poor's has now placed Irish Life Assurance's AA rating, and those of its US subsidiaries on credit watch with negative implications. This means it may consider reducing the rating by a notch to A+ although the rating could also be reaffirmed depending on developments.

The agency does not currently have a rating for Irish Permanent, but Moody's ranks its deposit and financial strength rating at A2/P-1 and C+ respectively

Irish Life already has a dominant position in Ireland in the sale of life insurance products, while Irish Permanent has a leading market share in mortgage lending.