National Irish Bank's (NIB) parent is likely to merge the Republic-based institution with its Northern Irish sister company, Northern Bank, in a move that could ultimately see its operations here and in Britain integrated into one business.
NIB's owner, National Australia Bank (NAB), said yesterday that "as the group moved towards an integrated model in Europe we will be considering the appropriate structures for Northern Bank and National Irish Bank in due course". A spokeswoman said that this process could lead to a merger of Northern Bank and NIB.
NAB recently merged its UK businesses, Yorkshire Bank and Clydesdale Bank. The spokeswoman said that the group's Irish and UK banks could ultimately be merged into one entity, and admitted it was likely that its regional headquarters, currently located in Belfast, could be shifted from the island of Ireland to Britain.
Staff were told in a memo earlier this week that NAB was looking at the possibility of merging its Irish interests. The news prompted Mr Larry Broderick, general secretary of the Irish Bank Officials' Association (IBOA), to call on NAB to outline the implications for NIB's 700 employees.
"IBOA will be meeting with Mr John Stewart, chief executive of NAB Europe in early December," he said. "At this meeting we will be pressing him to outline exactly what NAB's intentions are." The spokeswoman said a Northern Bank/NIB merger would be unlikely to lead to job losses as the brands would remain and the branches maintained.
NIB yesterday reported that pre-tax profits had grown by 160 per cent to €36.5 million from €14 million in the year to September 30th. Chief executive, Mr Don Price, said that a major recovery in bad debt, involving a particular account, boosted the banks profits. He said that underlying profit growth was 36 per cent.
Its figures show that net interest income grew to €92.8 million from €83.7 million in 2002. Fee income fell by around 10 per cent to €29.2 million. This was partly due to a reduction in foreign exchange dealing, which in turn resulted from the fact that this was the bank's first full year of dealing with the euro.
Operating income topped €122 million, compared with €116.1 million last year. Costs dipped by almost 6 per cent to €82 million from €86.8 million, mainly because the 2002 results reflected the higher expenditure needed to manage the euro changeover. The bank's workforce also shrank by 70 through natural waste to below 700. This left NIB with a cost-to-income ratio of 65.5 per cent.
Mr Price yesterday said he was unhappy with the high cost-to-income ratio and explained that it was due to NIB's small size. "We lack scale, but we have got all the costs of a large clearing bank," he said. "It's not a good number and I would like to see that fall below 60 per cent."
Mr Price singled out the small to medium-sized enterprise (SME) sector as a key growth driver during the year. Lending to this market grew by 18 per cent over the 12-month period.
The bank's mortgage book grew by 12 per cent. Nationally that market increased by 20 per cent, but Mr Price said NIB was happy with the result on the basis that it was focused on the quality of the assets rather than volume. He pointed out that there was a strong emphasis on appraising individual borrowers. "Rates are low but the fact is that they will be higher," he said.
NIB confirmed that the Irish Financial Services Regulation Authority (IFSRA) reviewed its mortgage-lending criteria along with those of the other banks. IFSRA recently warned the institutions to tighten their criteria.
