Ireland tells banks to cut costs before being put up for sale
* Ireland not looking to sell equity until banks cut costs
* Noonan promises easier budgets unless disaster strikes
DUBLIN Feb 28 (Reuters) - Ireland's government wants its mostly state-owned banks to further cut costs before it sells them in full, something it is not yet minded to do, finance minister Michael Noonan said on Thursday.
Ireland has slowly begun to cut its exposure to the banking sector after a property crash that ravaged the economy forced it to pump 64 billion euros ($83 billion) - or around 40 percent of annual economic output - into its stricken lenders.
Noonan reiterated that he is prepared to offload some debt at the right price in state-owned Allied Irish Banks and Permanent TSB, similar to the sale of contingent capital in Bank of Ireland that last month recouped 1 billion euros for the state.
However he said he would not rush into anything beyond that until he saw leaner cost bases at banks that have already cut thousands of jobs and shrunk their balance sheets under the terms of Ireland's EU/IMF bailout.
"On the equity in the two banks and the 15 percent in Bank of Ireland, I'm not disposed to put that on the market because I don't think we'll get full value," Noonan told parliament.
"I want to build up the values in the banks, cut their cost base so what the state holds becomes more valuable."
The IMF, one of Ireland's so-called "troika" of lenders, said in December that the reduction in average staff count per bank branch to 29 from 35 following widespread redundancies and branch closures may still be insufficient to reduce operating costs as much as needed.
Ireland hopes it will ultimately not have to wait to sell its banks to private investors but that Europe's new rescue fund will first take stakes off its hands, however some euro zone creditor countries are reluctant to allow precious rescue funds be used in such a retrospective manner.
Dublin has turned its attention to this issue after striking a key bank debt deal with the European Central Bank earlier this month to ease the country's debt burden.
The government has promised voters less austerity over its next two budgets as a result of the deal and Noonan said on Thursday that unless something disastrous happens, the public would see a benefit between now and 2015.
He had appeared to take a step back last week when he said that it was too soon to say for sure what the leeway would mean for next year's budget amid calls from the country's central bank governor and EU Economic chief Olli Rehn for Ireland to stick to its fiscal targets.
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