Bloomberg News

Irish Life Buys 650 Million Euros in Northern Rock Deposits

August 30, 2011

Irish Life & Permanent Plc (IPM), the nation’s lender most reliant on wholesale funding at the end of last year, agreed to buy Northern Rock Plc’s 650 million-euro ($938 million) Irish deposit book, marking its second such purchase this year.

The Dublin-based lender expects the accord, which will involve acquiring accounts of 17,000 Northern Rock customers, to be completed by the end of the year, it said in an e-mailed statement today. Irish Life spokesman Ray Gordon declined to comment on the cost of the deal. It acquired 3.6 billion euros of deposits from Irish Nationwide Building Society in February.

Ireland’s government seized control of Irish Life last month by injecting 2.7 billion euros into the group’s unprofitable banking unit, Permanent TSB. Finance Minister Michael Noonan is forcing the sale of the company’s life assurance unit to raise some of the 1.3 billion euros Permanent TSB needs to reach regulatory capital targets set in March.

“This is a very significant transaction for Permanent TSB and is an important strategic step for the bank as deposits are critical for all Irish banks going forward,” said David Guinane, chief executive officer of the banking division.

Irish Life, which is due to report first-half figures tomorrow, had a loan-to-deposit ratio of 248 percent at the end of December, compared with an average 180 percent among the country’s four so-called going-concern banks, the Central Bank said March 31. The Dublin-based Central Bank ordered the four lenders that day to bring the value of the bank’s lending book closer to that of its customer savings. That would mean selling or winding down more than 70 billion euros of loans by the end of 2013 to cut this ratio to 122.5 percent.

The Irish Life spokesman declined to say what effect the Northern Rock transaction will have on its loan-to-deposit ratio before the company’s results.

To contact the reporter on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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