Page last updated at 15:11 GMT, Thursday, 8 April 2010 16:11 UK

Who could buy First Trust bank?

AIB logo
AIB is selling assets to raise capital levels

The bank workers union has appealed to Northern Ireland's politicians to help block the sale of First Trust bank. Its under-pressure parent company AIB is selling to raise much needed funds. But who might be interested in buying?

By its most recent financial performance, First Trust might not appear to be a hugely attractive proposition.

In 2009 it lost £86m compared to a £33m profit in 2008.

However, its accounts point out that it had underlying operating profit of £119m which was wiped out by more than £200m that had to be set aside to cover bad property loans.

Aside from that underlying profit, other selling points are an approximate 20% share of the Northern Ireland market and two large office complexes in Belfast city centre.

Two of its main competitors are unlikely to be in the race for First Trust.

Dublin-based Bank of Ireland needs to raise money rather than spend it while Ulster Bank is owned by RBS which is selling part of its branch network in Great Britain.

Job losses

That leaves the other main force in the NI market, Northern Bank, which is owned by Danske of Denmark.

Economic commentator John Simpson believes Danske could be interested "at the right price".

First Trust logo
First Trust is one of Northern Ireland's four main banks

"As it already has a presence here it could get economies out of a deal, which would inevitably mean job losses.

"If a company comes in from the outside it is less likely to mean job losses, but the trade off is that AIB would not get such a good price for the business."

However Ciaran Callaghan, analyst with Dublin-based stockbrokers NCB, cautions that Danske have had "an awful time" in Ireland and the Danish-based management would be reluctant to commit to an expansion in Ireland.

He believes that while AIB may be able to sell the part of its business in Great Britain it could struggle to find a buyer for First Trust.

Expansion

He points to the fact that the Northern Ireland economy does not appear to be recovering as quickly as that in GB and that First Trust had a weaker performance than the rest of the UK unit.

Asheefa Sarangi, an analyst at RBS, agrees that buyers will not be lining up.

She said there are a number of UK banking assets due to come onto the market in the coming months and that AIB's UK business is "not the most attractive amongst the beauty parade."

She said that in a buyers market AIB would struggle to get more than 610m euros (£533m) for the whole UK unit and at that price it would not be worth selling.

However if another bank is interested the RBS branch sale gives an indication of who has the ambition and the capacity for expansion.

Reports suggest that there are five bidders for the RBS branches: Spain's Banco Santander, BBVA also of Spain, Australia's National Australia Bank (NAB), Richard Branson's Virgin Money and US private equity firm JC Flowers.

Santander already has a significance presence in Northern Ireland through its ownership of the former Alliance and Leicester and Abbey businesses.

NAB can be ruled out as it left the Northern Ireland market in 2004 with the sale of Northern Bank to Danske.

Mr Simpson said Virgin might be interested if it first won the race for the RBS branches but would not have "the resources and energy" to compete for both at the same time.

Another British high street name, HSBC, has survived the economic crisis relatively unscathed and so would have the financial muscle to make a purchase.

The bank already has a handful of branches in Northern Ireland, however it has only ever talked about expanding organically to eight or 10 branches.



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SEE ALSO
Union appeal to MLAs on bank sale
08 Apr 10 |  Northern Ireland
First Trust staff shocked at sale
01 Apr 10 |  Northern Ireland
Allied Irish Banks make huge loss
02 Mar 10 |  Northern Ireland

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