National Australia Bank (NAB) will decide on the future of its two Irish banks in the new year, the bank's chief financial officer, Mr Michael Ullmer, said yesterday.

Mr Ullmer told NAB investors that the bank would provide an update on its European strategy once a decision on National Irish Bank and Northern Bank had been reached.

He said NAB would be determining whether a sale of the two banks would be better than the bank retaining the assets and "rebuilding and organically growing" them.

"We've circulated an information memorandum to test the market," Mr Ullmer said.

"It's a complicated process, significant assets are at stake and interested parties will understandably want to carry out careful due diligence."

The future of the two banks was left in confused territory earlier this week, when it emerged that the perceived lead bidder, Halifax Bank of Scotland (HBOS), was losing interest in a deal.

While some commentators dismissed this apparent exit as posturing ahead of making a bid, the news added to uncertainty within the NIB and Northern staff bodies. This led the Irish Bank Officials Association (IBOA) to seek a meeting with senior management from the two banks in Belfast yesterday.

An IBOA spokesman last night described the discussions, which continued late into the afternoon, as constructive. He declined to comment further until NIB and Northern Bank staff can be briefed on the matter on Monday.

No party has yet made a formal bid for NIB and Northern, which have been valued at between € 1.2 and € 1.5 billion as a package.

Bidding speculation has centred on HBOS, Lloyds TSB and Rabobank, although none of the three have made public comment on the matter. It is believed however that Lloyds and Rabobank are firmly out of the picture. It is further thought that other international players may still be considering their options on NIB and Northern. Market speculation yesterday centred on Credit Agricole, as a possible bidder, but a spokeswoman for the French bank flatly denied this.