Outlook: Irish Permanent

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BY THE standards of a Citicorp and Travelers, the mooted merger of Irish Permanent with Irish Life is hardly a transaction to set the pulse racing. But at least it is something, and in these markets investment bankers have to take whatever's going. Furthermore, it may have a wider significance.

If evidence were needed that the pressures for consolidation in financial services remain as intense as ever, despite the turmoil in financial markets, this is it.

For the record, the merger will create Ireland's third-largest financial services group after Allied Irish Banks and Bank of Ireland. It scarcely needs saying that once the single currency comes into being at the turn of the year, Ireland becomes part of one giant European market and all three will look like minnows, both in terms of market share and set against the giants of Germany, France and Italy. The lower interest rates that come with single currency membership may in any case require stronger balance sheets all round.

So this is an entirely logical move. Less clear is whether Britain's Abbey National, with 8.7 per cent of Irish Permanent, will want to spoil the party. In theory Abbey cannot do anything until Irish Permanent's golden share expires a year from now. The move is therefore bound to be seen as defensive to some extent, since by the time Abbey can bid, Irish Permanent will have been absorbed the larger Irish Life.

Abbey won't want to do anything hostile, but if it can offer a good price, Irish Permanent would be more or less obliged to accept it. On the other hand, Ireland is a comparatively small mortgage market. If Abbey really wants a slice of the Celtic Tiger, it might do worse than to wait for the merger to happen and then take in the two together.