The decision by British bank HBOS not to proceed with a bid for rival Abbey National has negative implications for the Irish banking sector, analysts have warned.
Goodbody's Mr Eamonn Hughes said "its willingness to prove to its investors that it still has strong growth opportunities could see HBOS speed up any moves on the Irish retail market".
He added that the decision not to bid formally against the agreed £8.6 billion (€12.6 billion) offer from Spain's Santander Central Hispano would mean "HBOS will not have any distractions now other than to focus on tackling the retail market in Ireland".
In April, HBOS said it would target the Irish retail market through its Bank of Scotland (Ireland) operation.
Mr Hughes said HBOS could attack on the pricing front, cutting the profit margin on mortgage business.
This would undermine the profitability of Irish rivals, particularly Irish Life & Permanent. Goodbody estimates that a 40 per cent cut in mortgage spreads would slice 16 per cent off Irish IL&P's pre-tax profits. AIB and Bank of Ireland would face a 3 per cent hit at the pre-tax profit line.
An alternative approach, according to Mr Hughes and Davy analyst Mr Scott Rankin would be for HBOS to target either NIB, widely assumed to be on the market, or IL&P.
Davy reckons NIB could fetch between €350 million and €400 million, with HBOS, IL&P and even Royal Bank of Scotland among the possible suitors.
With its network of 59 branches, NIB would give HBOS a platform to launch its retail challenge to the market leaders.
