Professional investors have given a sceptical reaction to the news that Bank of Ireland is in talks with Abbey National regarding a bid for the British mortgage lender.
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Merger would create a group with a stock market value of around $22 billion
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Bank of Ireland fell 0.77 cents to €9.40 when the market opened this morning. Shares in Abbey National, Britain's sixth biggest bank, rose as much as 8 per cent, but analysts felt any deal was unlikely to materialise.
"I wouldn't give this deal a high chance of progressing beyond the initial discussion phase," said Teather & Greenwood banking analyst Mr Martin Cross.
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A merger would create a group with a stock market value of around $22 billion. The approach gave a much-needed lift to Abbey's shares, which sank to a seven-year low on Friday. The stock has steadily fallen over the year after rising bad loans led to a profit slump and the departure of chief executive Mr Ian Harley.
Analysts pointed out Abbey still faces the risks of more bad loans at its corporate lending division, and a weakening capital position as a stock market slump hits its life assurance unit Scottish Mutual.
Abbey escaped a hostile bid last year from British rival Lloyds TSB after the government blocked the deal on competition grounds, and analysts said Bank of Ireland's proposal paled in comparison to Lloyds's high premium offer.