BANK STRESS TESTS: IRISH LIFE & Permanent (IL&P) temporarily suspended trading in its shares yesterday and is planning to sell off assets in a bid to avoid State ownership.

The company is expected to sell its pensions and investments business, Irish Life, and its fund management business, Irish Life Investment Managers, to raise the potential capital bill facing the company after today’s Central Bank stress tests. This amounts to more than two-thirds of the overall business of the company.

The estimated capital shortfall is expected to be in excess of €3 billion to meet mortgage losses under a worst-case scenario and the cost of reducing the size of the bank. The company’s banking unit, Permanent TSB, has the worst funding of the six Irish lenders, with loans far outstripping deposits.

The sale of Irish Life and Irish Life Investment Managers, both profitable businesses and the biggest players in their respective Irish markets, would have to take place before a decision is made on the amount of capital that must be injected by the Government and the determination of the size of the stake taken by the State.

“It is likely that our shareholders will do whatever they can to minimise the burden on the State, and if that means selling the life assets then so be it,” Gerry Hassett, chief executive of the retail division of Irish Life, told RTÉ.

“I think the assets are valuable, and we’ve had a lot of expressions of interest in the business.”

The embedded value of the life insurance business was €1.3 billion last year.

The scale of the capital required is likely to push the company into majority Government control, with the State taking a share of more than 50 per cent.

AIB and Bank of Ireland were both required to dispose of businesses and assets over the past year as part of the recapitalisation of both institutions.

IL&P would have to do the same before the Government decides how much capital would be required for the business.

Trading in the bank’s shares was put on hold in Dublin and London until tomorrow. The bank, the only Government-guaranteed lender to avoid a bailout so far, shed 45 per cent of its share price on Tuesday after reports the stress test results would push it into Government ownership.

In a statement yesterday morning, the lender said it “notes the recent media comment” on its expected capital requirement after the stress tests. The tests “are not completed and the quantum of capital that may be required by the group, and the source of that capital, is not yet finalised”.

Minister for Enterprise Richard Bruton said the stress tests had to be so tough and fair that they removed any doubts about the state of the banking sector. “We need finally an honest assessment, one that is based on best international practices,” he told German newspaper Handelsblatt.

“Afterwards there can be no feeling that people are looking at Irish banks through rose-tinted glasses ... Our ambition is to clean the table, and we will do that.”