Bank of Ireland has received unsolicited bid approaches from unnamed groups, it confirmed yesterday, as its shares soared by 30 per cent amid rumours that the Irish Government plans to consolidate the banking sector.

In a separate development, Irish Life & Permanent said that it had been in discussions with the EBS Building Society over how the two “might work together in the current market environment”.

Bank of Ireland said: “No decision on these approaches has been made. Bank of Ireland will keep its stockholders informed as appropriate.”

Eugene Sheehy, chief executive of Allied Irish Banks, said that it was merely speculation that only two large banks would remain operating in the Irish market.

Ireland’s banks have been under pressure to shore up their capital, after being overexposed to a falling property market. Shares in the four listed banks have fallen by more than 90 per cent from last year’s highs.

Ireland was one of the first countries to respond to the global credit crisis, announcing a guarantee for bank liabilities worth €440 billion. Under the guarantee, the Government has the power to force mergers between the covered financial institutions.

“The rumour-mill in Dublin has gone into overdrive,” Scott Rankin, an analyst at Davy, said. “There are stories of gangs of sharp-suited investment bankers/private equity guys hanging around Dublin hotels.”

Talks took place on Thursday night between Brian Lenihan, the Finance Minister, and senior executives from the financial institutions covered under the State’s guarantee scheme.

“The minister asked the guaranteed institutions to reflect on a number of matters,” a Finance Ministry spokesman said yesterday. “Further discussions between the parties will resume in a week.”

Some reports, quoting unnamed participants in the meetings, said it was believed that only Bank of Ireland and AIB would remain after the shake-up. The Government denied that it was working on creating two super-banks and there was still no clear picture of how a deal would be put together or how long it would take. “The characterisation of the discussions in relation to a two-bank model in the Irish banking sector is simply untrue,” the ministry spokesman said.

There were also reports yesterday that a consortium of American private investors was interested in taking a large stake in Bank of Ireland and, possibly, in a merged group comprising Bank of Ireland and Irish Life & Permanent.

The Irish Independent reported that Cardinal Asset Management, an investment company, had assembled a consortium and planned a bid of up to €3 billion (£2.5 billion) to buy a stake of up to 60 per cent in Bank of Ireland. The report said that the consortium included funds from Carlyle and Kohlberg Kravis Roberts, the private equity groups.

Nobody could be reached at any of the groups for comment.

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