Irish financial institutions will have to contend with even more competition with the arrival of Royal Bank of Scotland. However, most analysts suggest the institution will not rush to make its presence felt here.

In Ulster Bank, Royal Bank of Scotland (RBS) has secured the Republic's third-largest clearing bank. It is a profitable operation and has made a healthy contribution to NatWest for many years.

The consensus for the moment seems to be that RBS will be anxious to retain the status quo. Its primary focus will be on implementing the merger of its business with that of NatWest in the UK and its Irish operations are likely to be a secondary consideration in the interim, according to London-based analysts.

"Royal Bank of Scotland is likely to be fully occupied for some time with the integration of NatWest in the UK market. Ulster Bank has been run as an independent entity for a long time and is likely to remain that way for the time being. Royal Bank can't ignore Ulster Bank but it has a lot of other things to do at the moment."

RBS's arch rival, Bank of Scotland, which also bid for NatWest, has certainly made its presence felt here since its arrival last August. By offering mortgages at an interest rate of 3.69 per cent - more than one percentage point below the other Irish lenders - it has forced all the domestic players to live with much lower margins.

Analysts believe RBS is unlikely to want to get into a mortgage price war in the Republic. The mortgage market is still relatively small here and it is unlikely that RBS could justify the relatively small profit growth it would achieve by slashing its margins.

RBS is regarded as being very skilled when it comes to marketing and packaging its products and this may be where any immediate changes will be seen in the Ulster Bank group. Further down the line though, it is likely to consider introducing new products at Ulster.

The most likely impact of the merger for the Irish market is that it is expected to trigger even further consolidation between the major Irish players. In a report on the Irish banking sector this week, ABN Amro's financial analyst, Mr Eamon Hughes, suggested the outcome of the NatWest takeover battle would have huge implications for the Irish banks. It will immediately trigger a strategic rethink at Irish Life & Permanent which had submitted a joint bid with Bank of Ireland for Ulster Bank. If successful, they had planned to break up Ulster's operations with Irish Life & Permanent retaining those in the Republic and Bank of Ireland taking control of those in Northern Ireland.

Irish Life & Permanent will now be forced to consider linking up with another Irish institution, such TSB, ACC or First Active.