'Super bank' would both save and destroy Irish banking jobs

Delays in the government rescue package contributed to a grim week for the stocks of Irish banks, which slumped by around 50% in five days. Fears of a meltdown remain, and one of the country's top bankers says a merger between Bank of Ireland (BoI) and Allied Irish Bank (AIB) is necessary to restore faith in the system.

Mike Soden, a former Bank of Ireland chief executive, thinks that the big two banks in Ireland have to merge to fend off threats from "international predators" and to rekindle belief in the country's slumping property market.

He told the Sunday Independent that a merger between BoI and AIB was vital "to retain control of banking and banking infrastructure in the country".

He said that not doing this would be a "massive blow" to employment in the finance industry.

"If we don't do it, we'll become a branch economy," he said. "A branch of Lloyds TSB, Barclays or Citi."

A research note by NCB stockbrokers says it's almost certain the government will try and orchestrate consolidation between the six banks involved in the guarantee plan. However, it's more likely that one of the bigger two banks would swallow up one of their smaller rivals.

"We see some of the smaller players being absorbed by the larger banks and believe it possible that Irish Life & Permanent will merge with Bank of Ireland or AIB," it said.

A merger between BoI and AIB would be catastrophic for Irish banking jobs. There would be significant overlaps in both retail and commercial banking, investment management and the capital markets divisions, which include treasury services, corporate banking, and investment banking and corporate finance, both domestically and internationally.

Sebastian Orsi, an analyst at Merrion Stockbrokers, discounts the possibility of a merger between the two banks because the government would look to avoid the substantial job losses it would inevitably involve.

The two banks tell us they currently have no plans to trim headcount and that they continue to recruit as business demands it.