Merrion Capital favours First Active as a buy for investors at the moment while trading at around #2.93. The beleaguered former building society has undergone extensive restructuring and repositioning, which should improve its core profitability and reduce its cost base.

The bank also holds a substantial amount of surplus capital of about #138 million (£109 million), equal to one-third of its stock market value. This is depressing its return on equity but, combined with an attractive franchise, the group could become a potential takeover target when legislative restrictions in this regard expire in October 2003.