The sale of Ulster Bank, likely to take place over the coming months, will represent an important landmark in the development of banking in Ireland. Its parent, the UK NatWest bank, has said it will either float Ulster Bank off on the stockmarket or sell it; the latter option appears likely to be taken given the strong presence of financial stocks on the Irish market. Already potential bidders are lining up, realising that Ulster Bank would be an attractive purchase.
Ulster Bank is one of the few genuine all-Ireland businesses. Its headquarters are in Belfast, while it earns some 60 per cent of its profits in the Republic. It is the second biggest bank in the North and the third biggest in the Republic with a strong retail operation and well-developed commercial treasury and stockbroking operations. The only reason NatWest is selling its Irish subsidiary is that its management is under pressure due to a hostile bid from the Bank of Scotland and it is trying to gain the support of its shareholders by raising some cash. Bank of Scotland has also indicated that if its bid succeeds it will sell off a number of subsidiaries, including Ulster Bank.
There is already one strong bidder in the field. Irish Life & Permanent is hoping to get a strong commercial banking network to add on to its existing life assurance and mortgage operations. Others are likely to join in. Bank of Ireland would be particularly interested in the operations in the North, while a range of other domestic and overseas players will be considering their position in the weeks ahead.
Ulster Bank could be sold as a whole or split North and South and sold to two separate purchasers. Ulster's management naturally favours the former approach and argues with some justification that its all-Ireland franchise is one of the group's key strengths. However, it will be some weeks before the likely shape of the sale becomes clear.
The focus of NatWest management will be to get the best possible price from the sale. But the process may yet provide tricky questions for competition regulators on both sides of the Border who must try to balance the need to encourage competition in the home market with the desire of the banking groups to develop sufficient scale to compete internationally.
A sale to Irish Life & Permanent would be likely to spur competition by creating another major player in the market and would not raise any major regulatory questions. The same would apply if Ulster Bank was sold to an international bank not already represented here, or with a small existing operation. Questions would arise, however, if one of the two big existing banks in the Republic was to try to buy Ulster Bank's operations south of the border.