ICC Bank staff who recently struck a deal to buy a 14.9 per cent stake in the company may end up exchanging it for shares in their new owner's group, it has emerged.

Under the terms of the sale of the State bank, the purchaser will be able to buy the 14.9 per cent staff shareholding. The new owner can offer ICC staff shares in its own company or can buy out the 14.9 per cent stake through a bond mechanism. The new buyer would have to establish the bond and the process must be completed within 15 years.

The details are contained in the information memorandum which has been issued to potential buyers and which has been seen by The Irish Times. Indicative bids for the State-owned bank, which will fetch up to £330 million (€419 million), must be submitted by August 23rd.

Among those said to be interested are Ulster Bank, IIB, Equity Bank and Anglo-Irish Bank.

The document, which gives a detailed breakdown of ICC's business, says its overall market share of loans to Irish business has fluctuated between 8.5 per cent and 9.2 per cent in the past two years. It says it currently has more than 3,700 lending customers and has pursued a policy in the last five years of lending towards customers with a minimum loan requirement of £250,000. The memorandum points out that, over the past five years, ICC has repositioned itself within the small and medium-sized enterprises lending market. It estimates that it now holds 9 per cent of the lending market in which it operates. It lists its main competitors as AIB, Bank of Ireland, Ulster Bank and Anglo-Irish Bank.

The memorandum shows that ICC loans to the construction/ property sector at the end of January were up to 29.3 per cent of its lending portfolio from 27.4 per cent in October last year. The rise includes more than £90 million which the bank has lent out for UK property.

A breakdown of loans by sector shows that manufacturing (16 per cent) and distribution (14.9 per cent) form the next highest percentages of its loan portfolio. Public houses account for 6.8 per cent of its loans, while hotels/catering account for 14.5 per cent.

The average lending exposure of customers has increased to £341,000 at October 31st last, compared to £233,000 on October 31st in 1996. The company has also reduced its exposure to larger loans. Last October, 35 per cent of the portfolio comprised loans of £500,000 or less, compared to 49 per cent in October 1996.

ICC has also seen its gross lending margins decline over the past 21/2 years, falling from 2.56 per cent in October 1996 to 2.03 per cent in April this year.

The bank says its asset finance division has a 3.8 per cent share of the non-consumer credit market. Its main competitors in this area are GE Capital Woodchester, Bank of Ireland Finance, AIB Finance and Lombard & Ulster.

It says margins in the industry are very competitive and ICC seeks to earn a net margin of not less than 2.5 per cent after commissions. "The approach to date has been to drop margins below 2 per cent only in exceptional circumstances," it says. However, its gross margins have been improving and now run at 2.8 per cent, compared to 2.2 per cent in October 1996.

The bank also runs a venture capital operation, one of the largest of its type in the Republic. It says the compound annual return on its investments has been 21 per cent over the past 11 years. The market value of its investments, as valued by its directors, is £48 million, with a book value of £25.7 million, accounted for in the October 1998 accounts.

As of April 30th last, ICC Venture Capital had investments in 56 companies, either directly or through managed funds.

In the memorandum, the bank also criticises the decision of the Minister for Finance, Mr McCreevy, to limit Business Expansion Schemes by reducing the amount that can be invested in a company to £250,000 from £1 million. It says ICC Bank management believes the restriction "has undermined the viability of BES fund management as a worthwhile profit contributor" and "consequently" ICC decided not to launch a fund in 1999.

The company said it had taken a generally "conservative approach" to BES schemes and that the funds which matured to date had realised compound annual returns to investors of 13.5 to 16.3 per cent.