Expectations mount that NAB will sell NIB operation

Expectations were growing yesterday that National Irish Bank (NIB) would be sold as its parent company reached the halfway stage in a two-day crisis board meeting focused on the loss of market share and a range of operational issues.

Last week, the Director of Corporate Enforcement, Mr Paul Appleby, published the report an investigation into NIB by High Court-appointed inspectors Mr Tom Grace and Mr John Blayney.

They found that the bank colluded and encouraged tax evasion through the use of bogus accounts and unauthorised investment products during the 1990s.

They also established that during the same period, it overcharged customers interest and administrative fees on their accounts. The report laid the blame on "higher management". NIB has already paid back €30 million to the State and its customers and is facing a €34 million bill for the cost of the investigation.

Its parent, National Australia Bank (NAB), has been hit with a $360 million Australian dollar (€210 million) foreign exchange loss from a trading scandal earlier this year. A profit warning last month predicting a 23 per cent fall in earnings also dented its reputation.

According to a report in today's edition of Australian daily The Age, its shares touched a three-year low of $26.07 Australian dollars yesterday.

The board of NAB began the meeting yesterday in Australia. The head of its European operations, Mr Ross Pinney, is at the meeting.

His presence has added to speculation that NAB may decided to sell some of its businesses at this side of the world, and particularly NIB and Northern Ireland-based Northern Bank. It also owns the Clydesdale and Yorkshire banks in the UK.

Analysts and brokers believe that Halifax Bank of Scotland (HBOS) and Royal Bank of Scotland, are likely suitors for NIB and Northern, with HBOS tipped to make a bid for both.

Yesterday, Davy Stockbrokers' analyst Mr Scott Rankin suggested that the 90-branch Northern Bank could fetch up to €1.6 billion, and valued NIB at €400 million.

However, Goodbody Stockbrokers' analyst Mr Eamonn Hughes said he doubted that the board would decide before the bank had completed a strategic review, which he said would take some time.