The proposed merger between the two Polish banks in which AIB has a majority shareholding, Wielkopolski Bank Kredytowy (WBK) and Bank Zachodni, has been approved by their management boards.

The merger still requires shareholder approval which will be sought at extraordinary general meetings on December 20th. To proceed, it must be approved by 75 per cent of WBK's shareholders and is also subject to regulatory approval.

WBK and Bank Zachodni together will create Poland's fifth largest bank. AIB will have a 70 per cent stake in the merged entity. Under the terms of the merger, Bank Zachodni will acquire WBK's property in exchange for shares. This mechanism has been adopted to comply with the agreement between AIB European Investments and the Ministry of State at the Treasury in Poland.

The share ratio has been set at 1.72 WBK shares for each Bank Zachodni share. After the merger, WBK shareholders will hold 55 per cent of the enlarged bank while Bank Zachodni shareholders will have a 45.2 percent stake.

The merger is proceeding almost two years earlier than scheduled largely due to the pace of consolidation within the Polish banking market. AIB has stated that the merger will deliver significant cost savings over the next three years through the streamlining of head office functions, marketing and the integration of its branch banking activities.

It estimates that cost synergies will be about 54 million Polish zlotys (€13.6 million), rising to 162 million zlotys in 2002 and to 202 million zlotys in 2003. The merger is expected to cost 153.5 million zlotys. The two banks will have a combined branch network of more than 400 branches, with plans to expand to 530 by the end of 2002.

Meanwhile, AIB has appointed Mr Derek Higgs to its board as a non-executive director. Mr Higgs (56) is a former chairman of SG Warburg, the banking and corporate finance arm of the Warburg Group, where he worked for 24 years. He is a member of the Financial Reporting council and director of the British Land Company, Egg, Jones Lang LaSalle and London Regional Transport.