BANK of Ireland has received clearance from the British Trade and Industry Secretary to proceed with its takeover of the Bristol and West Building Society. The £600 million sterling deal, which will be the largest ever acquisition by Bank of Ireland, is expected to be completed by July 1997.

The UK Department of Trade and Industry yesterday announced that it had approved the deal and had decided not to refer it to the Monopolies and Mergers Commission.

There are still a number of stages which must be completed before the deal can be completed. Members of Bristol and West, which is Britain's ninth largest building society, will have to approve the takeover. About one million members are expected to vote on the issue in April.

Bank of Ireland shareholders will then have to vote on the move at an extraordinary general meeting. In addition a number of regulatory approvals are necessary including the approval of the Central Bank in Ireland and the Bank of England and the Building Societies Commission in Britain.

Welcoming the decision a Bank of Ireland spokesman said there were still a number of stages to complete. It is a slow process," he said. But he added that the timeframe involved was still shorter than for most building society conversions.

The £600 million sterling deal involves cash payments of about £500 million to Bristol and West members and preference shares in the new Bristol and West plc to the value of about £100 million. Completion of the deal would increase Bank of Ireland's total assets by around 40 per cent. Analysts expect the deal will add 10 per cent to Bank of Ireland's annual earnings in 1998/1999.

Bristol and West recently reported a 23 per cent rise in first half profits to £45 million before exceptional charges associated with the takeover by the Bank of Ireland. In the first half of the year the building society increased its share of the British mortgage market from 0.6 per cent to 2 per cent. Gross lending rose by 54 per cent to £696 million while net lending doubled to £261 million.

The building society is concentrated in the south west of England and has nearly 160 branches. It has mortgage assets of £7 billion and a deposit book of £6 billion.

Bank of Ireland has been in the British market for 25 years and has 27 bank branches as well as a mortgage operation Bank of Ireland Mortgages (BIM). It plans to merge its mortgage operation with Bristol and West to get economies of scale and funding advantages for BIM.

The acquisition should reduce the cost of funds for the Bank of Ireland mortgage subsidiary. It will give BIM access to lower cost deposit funds raised through Bristol and West branches. The subsidiary currently raises the funds it lends to customers on the more expensive wholesale money market.

Bank of Ireland took a strategic decision to significantly increase its mortgage operation in Britain through the acquisition of Bristol and West. With over 70 per cent of group profits generated in the Irish market, the bank needed to make a strategic move to diversify its earnings stream.

While strong domestic growth in recent years has boosted profits significantly, an over dependence on the Irish market made bank earnings vulnerable to any downturn in domestic growth.