AIB has been identified by Goldman Sachs, the influential investment bank, as one of 15 international banks which are "compelling" merger and acquisition (M&A) targets.
The management of Irish banks have in the past been loath to consider selling, Goldmans says in a report issued yesterday, but it believes that "the recent management scandals have weakened their position" and may make them more amenable to an approach.
AIB, Ireland's largest bank, is not currently seen in the market as a potential bid target, Goldmans says. However, at its current price it would be "quite affordable for any of the large European banks." Among the potential bidders it identified were Barclays, HSBC, HBOS - the bank formed from the merger of Halifax and Bank of Scotland, BBVA and Santander of Spain and Lloyds.
For a bank like Santander, in particular, "an acquisition of Allied Irish Bank would allow it to to further diversify its earnings away from emerging markets ( Brazil in particular), while at the same time establishing a foothold in the United States".
Through buying AIB, any acquirer would be purchasing an interest in the US banking market, through its 22.5 per cent interest in M&T, Goldman points out. This could provide cheaper exposure to the US market than a direct purchase of an American bank.
Although AIB does not control M&T, an acquirer could conceivably launch a tender offer for the 49 per cent of the bank that is publicly traded and thus gain control.
For some $24 billion an acquirer could gain control of both AIB and M&T, the research note points out.
AIB's position in the Irish market - one of the few European markets with favourable long-term population dynamics - is also seen as an attraction. AIB, led by group chief executive Michael Buckley, also has an a relatively strong earnings growth outlook and is expected to deliver long-term EPS growth of 10 per cent, higher than most European banks.
"In a Europe-wide context, Irish banks clearly need scale", Goldmans says and "this condition could act as a catalyst for management to sell".
However, the investment bank warns that in the past the management of Irish banks have been unfriendly to the idea of selling. It also cautions that the Government might not support a sale of one of the big two Irish banks.
The report identifies 15 "compelling bank M&A targets" in the US and Italy but also in markets as diverse as Taiwan, Brazil and Malaysia.
