NAB set to merge UK and Irish banks

NATIONAL Australia Bank, having failed in attempts to buy a major British bank, looks set to merge its UK and Irish banking operations but faces stiff union opposition.

The group, which needs to boost its scale and distribution, is reviewing the structure of its two Irish banks - Northern, based in Belfast, and National Irish, based in Dublin, and has told staff this week that a merger of the two businesses is likely.

The bank is already integrating its Yorkshire and Clydesdale banking operations. The move to a common operating system paves the way for NAB to integrate all four banks under one banner, headquartered in London.

'The process to review that has just commenced,' said a NAB spokesman. 'A lot of things are being looked at but no decisions have been taken. The brand names will all remain regardless of what we do.'

NAB will outline its British strategy at a briefing for fund managers and analysts in Melbourne in January.

The Irish Bank Officials' Association is worried about potential job losses and branch closures as a result of any merger. The association plans next month to meet NAB's European-head, Scottish-born John Stewart, to outline-their concerns. 'We will be pressing him to outline exactly what NAB's intentions are,' a spokeswoman said.

The overhaul underlines NAB's desire to improve the efficiency of its UK and Irish operations after repeated attempts to find a merger partner failed. The last attempt was a failed tilt at Abbey.

The bank this week flagged a change of course, with plans to grow its British operations organically, targeting wealthy pockets in the South East.

NAB derives about 25% of its net earnings from its four retail banks in the UK and Ireland. However, their disparate technology systems have shackled its growth. NIB and Northern Bank operate similar technology platforms but the English and Scottish banks do not. Many back office functions for the two Irish banks are already handled in the UK.

So while NAB's UK profits have traditionally been strong, its share of the European financial services market has been stuck at about 5%. NAB chief executive Frank Cicutto said there would be no growth in British earnings in 2004, due in part to the cost of restructuring.

The group earlier this year took a stake in Australia's AMP, sparking speculation that it may bid for the financial services group.