BRITISH GOVERNMENT-OWNED bank Northern Rock has confirmed it is to sell its Irish operations to Permanent TSB, a bank almost entirely owned by the Irish government.

In a statement released this morning, the British-owned bank said the Irish operation was being sold as part of a larger review of its retail funding strategy.

The company did not say how much Permanent TSB was to pay in exchange for taking on its deposit book, which currently stands at around €650m. Northern Rock said its Irish deposits accounted for less than 5 per cent of its total deposits.

The sale is to be completed before the end of 2011, and is subject to the approval of the Minister for Finance. Northern Rock Ireland customers do not need to take action, and will be informed in writing.

Northern Rock’s CEO Ron Sandler said the sale of the Irish branch was a “necessary step as we continue to our funding strategy and focus on our commercial objectives.”

David Guinane of Permanent TSB said the acquisition of Northern Rock’s Irish operation, which has 17,000 customers, was “another milestone in the growth of our savings business”.

Northern Rock was taken into British government ownership in 2008 after the sub-prime mortgage crisis saw it locked out of money markets, but has been earmarked for a return to private ownership in the coming months.

Permanent TSB’s owner Irish Life & Permanent was the last of the six government-banked institutions to require a government recapitalisation, before being allocated €4bn in public funds under the last round of banking stress tests in March. It is now almost fully in public ownership.

IL&P’s life assurance operation Irish Life is expected to be spun off and sold to the private sector in the coming years.