ALLIED Irish Banks says it will meet government demands to slash staffing costs by 10pc if employees vote in favour of a Labour Court-backed deal over the coming two weeks.
The savings recommended by the Labour Court include scrapping automatic pay hikes for staff, a phased increase in the standard working week from 36 to 38 hours for no additional pay, and closure of the bank's costly defined benefit pension scheme, which has a funding gap of €1.1bn.
In April, Finance Minister Michael Noonan asked the heads of the three bailed-out banks to come up with savings of between 6pc and 10pc of their staffing costs, to reflect the ongoing losses and the cost of taxpayer support.
AIB chief executive David Duffy said yesterday the plan will meet the 10pc saving.
Around 8,000 members of the Irish Bank Officials' Association (IBOA), the main AIB union, are currently being balloted on the deal, with voting due to conclude on August 13.
A separate vote for more flexibility on transfers and redeployment is being held at the same time.
A spokesman for the IBOA said the union has not recommended for or against the deal, but said that there is no further scope for negation on the issues if the plan is rejected.
Management has backed the plan. Rejection by staff would inevitably lead to industrial relations problems.
AIB is the first bank to confirm that it can meet the higher end of Mr Noonan's payroll targets to mirror the savings sought in the public sector.
Yesterday, AIB said it returned to "pre-provision" profits of €162m in the six months ended June for the first time since it was nationalised as part of a €21bn rescue by taxpayers. Overall losses for the first half of the year were €758m, including cash set aside to cover historic lending. First half operating income rose 19pc to €916m.
Commenting on the figures, Mr Duffy said he is hopeful the bank will not require any additional capital when banks here are "stress tested" by European authorities next year.
He said the total cost of the mortgage crisis is not yet clear and added that he did not expect the bank to return fully to profit this year. The bank is midway through a three-year plan to return to sustained profitability.
Margins are being bolstered as the bank charges more for loans and offers savers lower interest rates.
AIB's reliance on the European Central Bank for emergency loans is falling sharply but remains high at €18bn.
A major redundancy programme that will see staff numbers cut by 2,500 also helped reduce the overall losses.
Mr Duffy said the bank is lending to companies and individuals. Based on approvals, it claims a 46pc share of the mortgage market, a 39pc share of lending to agriculture. Lending to small and medium enterprises rose by 11pc year on year.
"Management appear to be making tangible progress in rehabilitating the institution back to viability," said Ciaran Callaghan, an analyst with Dublin-based Merrion Capital.