ACC Bank and TSB Bank are to begin talks on a possible merger next week and are to report to the Minister for Finance, Mr McCreevy, in about three months.
The board and management at ACC have argued for a strategic alliance with a foreign bank as the way forward for the bank, while the unions favour a merger with TSB and flotation on the stock market. The start of formal talks between the two management teams means that the possibility of a merger between the two banks is now being seen as a serious option by both sides and it is also one that the Minister for Finance, Mr McCreevy, believes is worth exploring.
At the publication of its six month profits in July, ACC chief executive Mr John McCloskey said he saw merits in the ACC/TSB merger option.
"The businesses would make a good fit and there would be the opportunity to reduce costs. It is worth exploring what it could do for the shareholder."
He said at the time that he would not rule out the acquisition of a merged operation by a strong foreign bank.
A management-union committee is currently discussing ACC's future ownership. The committee is considering the "criteria to be used in respect of any change of ownership."
But union sources have said they have given no commitment to discuss options other than the merger of ACC with TSB and the talks between the two management teams indicate that ACC management is also now willing to fully explore this option.
About 400 of ACC's staff of 550 are represented by ATGWU, SIPTU and MSF. A merged ACC/TSB operation would be worth around £500 million.
TSB has been concentrating on developing the bank, growing its core business and increasing its competitive position. It has been putting an increasing emphasis on the small business market.
It has also been examining strategic alliance options. Four years ago the bank proposed to the Government that it be sold to National Australia Bank. The proposal was not approved. Since then it has been studying and investigating an array of strategic opportunities.
TSB made pre-tax profits of £22.1 million in the 1997 financial year, an increase of 10.5 per cent.
ACC reported a 38 per cent rise in pretax profits to £10.35 million, for the six months to end June.
The increased profits were based in part on growth in lending. There was strong growth in personal lending, including mortgages, and in loans to small and medium-sized businesses.
The bank has been seeking to broaden its customer base to achieve a balanced portfolio across the agribusiness, personal and commercial sectors.
