IRISH Permanent has confirmed it is in discussions to acquire Capital Home Loans, the London-based subsidiary of French bank Credit Foncier. The London mortgage provider was set up in 1989 and has loans outstanding of about £200 million sterling. It reported profits after tax last year of £0.5 million.

Credit Foncier is a publicly quoted bank with about 60,0,00 shareholders including some investment funds. It has a loan book of about £44 billion. In addition to lending on normal criteria, the group gets a government subsidy to give home loans at lower rates to disadvantaged people.

Capital Loans is an active mortgage lender with a relatively young mortgage book. Market sources said Irish Permanent could pay between £9 million and £11 million, depending on the premium agreed on net assets.

Irish Permanent wants to merge the operation with its existing branch operation in Britain to broaden its presence in that market. While the deal would be a small acquisition for Irish Permanent, it would add significantly to the Irish company's mortgage book in Britain - currently about £75 million.

Irish Permanent has two branches in London. The branches started as deposit takers and later expanded to advance home loans. The group also advances home loans through intermediaries.

The acquisition of Capital Home Loans would give Irish Permanent capacity to significantly increase the rate of growth of its mortgage business in Britain.

Credit Foncier declined to comment yesterday. Shareholders in the French bank include Union of Swiss Banks Investment Managers which owns just over 9 per cent, Templeton Global Investors, which has around a 9 per cent stake, and Caisse Des Depots which has around 4 per cent.