Ireland’s largest bank, Bank of Ireland, outlined plans in April 2010 to dispose of its pensions and life assurance operations, as well as its asset management business and other small operations. The asset management arm was sold for €57 million in October 2010, and as of March 2011, the life assurance division was being prepared for sale. Similarly in September 2010, the second largest Irish bank, Allied Irish Bank, disposed of its stake in Polish bank Zachodni WBK for €3.1 billion to Spanish bank Santander.

Normally, business units are sold to either concentrate on core business activities, to raise capital or to off-load less profitable divisions or businesses.

In the case of both of these Irish banks the reason for selling off these divisions is somewhat different, although primarily related to raising capital.

While they may not be key businesses, they were profitable and had a good asset base. The reasons for the sales are quite complex, but in essence, new capital ratios set down by the Irish financial regulator means the banks have to get cash to increase their balance sheets within a certain timeframe.

Questions 

1 Would a business normally dispose of a profitable division?

2 If you were examining the option of purchasing some of the banking operations mentioned above, what would be your key concern?