Irish banks, as they’re weaned off ECB funding and learn to “stand on their own two feet once more”, are going to be decidedly slimmer. But while those in Ireland sweat it out on future redundancy announcements, banks are struggling to keep hold of talent in their UK capital markets divisions.

Irish banks have substantial operations in the UK, the bulk of which are considered prime targets for divesting, as pressure mounts for them to sell non-core assets as part of the EU bailout.

In terms of headcount, these have largely remained stable. Bank of Ireland, for instance, employs 2,670 in its UK Financial Services arm (its business and retail banking function), compared to 2,865 in December 2009. AIB has stalled the sale of its First State and AIB GB business banking business, which employ a combined 2,500 people (down from around 2,700 in 2008).

Even Anglo Irish, which is fully nationalised and has been split into a ‘good’ deposit bank and ‘bad’ asset recovery vehicle, still employs 480 people in the UK – across retail, corporate treasury and business banking – down from 573 at the end of 2009.

But the banks also have more niche capital markets functions in the UK, which employ decidedly fewer people.

BoI’s corporate banking function – which covers acquisition finance, project finance, structured and a range of industries – has a headcount of just 111, compared to 119 last year. Over 2,000 of AIB’s 2,400-strong capital markets division are based in Ireland, with the remainder in the UK and US.

Both are hampered by an inability to pay substantial bonuses. One AIB banker tells us this is creating some itchy feet in the UK.

“The uncertainty around the sale of the UK business banking division has left many keen to move on if they find the right opportunity, while the bank’s inability to pay its City-based capital markets staff in line with its competitors means there’s a big desire to move on,” he says.

But AIB still hasn’t announced a redundancy programme and has instead relied on natural attrition. In Ireland, where job prospects are decidedly more limited, this has slowed. Across the group, AIB has lost 600 staff so far this year, whereas over 1,100 left in 2009.

One corporate banking headhunter says that those in Irish banks are obvious targets for poaching, and that – by and large – most other UK banks are willing to consider candidates from these institutions.

“Bonuses are obviously down, but this is no longer a consideration for most of these guys,” he says. “Instead, they’re thinking about career longevity, and there’s a desire to get out before they’re pushed out.”

Impairment charges on loans related to NAMA continue to weigh heavy on capital markets divisions, but they remain fundamentally profitable. BoI made €449m before impairments to June 2010, while AIB posted operating income of €444m for the same period.

This isn’t specific to the UK, of course, but it does mean that – unlike the majority of business areas – banks are replacing departing employees.

For instance, BoI tells us that it has recruited “low single digit” numbers in its UK corporate banking divisions following departures this year, and it’s currently hiring for a leveraged syndicated finance manager in London.

AIB says it would look to recruit internally for “certain specialist skill-sets”.