Interview: Danske Bank believes that National Irish Bank is a franchise that needs rehabilitation and that it has a track record in rebuilding troubled banks.

Its chairman, Mr Peter Straarup, says the bank has acquired businesses in Norway and Sweden that had a "low standing" with their customers and has restored them to successful financial institutions.

"We are aware of NIB's problems but they are in the past. The franchise needs to be rehabilitated and we think we have the skills to do that," he said.

Danske Bank had not been mentioned as a potential suitor to acquire NIB and Northern Bank, with Halifax Bank of Scotland, which owns Bank of Scotland Ireland viewed as being the front runner.

Mr Straarup says it had decided to downsize its wholesale bank this year and had been looking for potential acquisition opportunities in northern Europe.

In late September or early October, Mr Straarup says, Dankse Bank became aware that National Australia Bank's advisers, Lazard, had been showing NIB and Northern Bank to potential purchasers as part of a "private process".

"Lazard was showing the banks to a few desirable targets. We kicked the door in ourselves and started the process," he said.

The bank said it didn't want to make its interest known publicly and acquired exclusive rights to negotiate with NAB for the two banks after HBOS failed to submit a bid.

Those discussions are understood to have broken down over price. The bank had also suggested that NIB and Northern Bank would require substantial investment in new information technology systems.

Mr Straarup says the bank will be investing in new technology and will be integrating the two banks into the Danske Bank group, bringing their administrative functions, finance, product development, communications and support functions onto its technology platform.

This restructuring is expected to cost about €200 million and should be completed by the end of 2006.

This is Danske Bank's first investment in retail banking outside of the Nordic area. Announcing the deal, it cited the profiles and structures of NIB and Northern Bank as being similar to Danske and pointed to the attractiveness of the healthy economies of the Republic and Northern Ireland.

Mr Straarup believes that while the NIB brand has been tarnished by the overcharging and sale of unauthorised investment products investigated by inspectors appointed by the High Court, it is a great name for a new entrant.

"National Irish Bank is a very attractive name to have and we will build on the franchise rather than starting from scratch," Mr Straarup says

" We will have to earn our keep but there would be no advantage to trading as Danske Bank in Ireland," he says.

The bank has assured the Irish Bank Officials Association that the acquisition does not pose a threat to the jobs of 2,300 staff at Northern Bank and 800 at NIB.

Danske Bank has said it will cut operating costs at the two banks by about 15 per cent but says this will not reduce customer service.

Mr Straarup says there are opportunities to reduce costs, particularly through the switch to Danske Bank's information technology systems.

NIB and Northern Bank would have purchased services such as back office and credit card processing from their sister banks in the UK which was expensive.

"We are not going to do dramatic things in so far as staff cuts," he said.

Mr Straarup said it would seek to introduce its "customer friendly" style of business in Ireland.