Irish Life & Permanent shareholders have today approved the setting up of a holding company which will pave the way towards consolidation in the financial sector.
Analysts expect the establishment of the holding company to help the group spin off its banking arm, permanent tsb, which has not had to resort to a State bailout or participate in Ireland's "bad bank" due to the strength of the group's life business and its lack of exposure to property developers.
"We will not be doing so in the future," chairman Gillian Bowler told shareholders.
She said discussions with the government and other players have centred on the idea of a "third force" in Irish banking to compete with top lenders Bank of Ireland and Allied Irish Banks .
"That is certainly one of the possibilities that we will examine," Ms Bowler said.
"There is a clear consensus now that we are likely to see significant consolidation within the financial services industry in Ireland," she added. "It's very important we can participate fully in any such process."
Building societies EBS and Irish Nationwide will each ask their members on Friday to approve changes to allow the government to inject capital in them, allowing them to complete plans to merge.
Many analysts see the possibility of permanent tsb later joining the two building societies to create the "third force", in return for a stake in the new entity.
"Such an outcome would significantly enhance the investment case for IPM," Davy analyst Emer Lang said in a note to clients.
While not exposed to the property development sector that most weakened competitors, Irish Life has not been immune to deep economic downturn. Data earlier on Thursday showed Ireland technically exited recession in the third quarter but analysts said the outlook remained very weak.
Last month Irish Life's shares fell sharply after it released a weaker set of bad loan and margin forecasts as it weaned itself off cheap ECB funds.
"We are not out of the woods yet, we are making good progress on stabilising our operations," Ms Bowler said .
"The next 18-24 months are critical but I believe we can emerge strongly over that time," she added.
Shares in the group traded 1 per cent lower at €3.13 by 12.25pm, while the wider Irish market fell 0.8 per cent.
Agencies