Tuesday 24 January 2017

Doherty hints at branch and job cuts as AIB losses mount

Lender hopes restructuring plan will stave off majority state ownership

Published 05/08/2010 | 05:00

AIB yesterday hinted that it will slash both staff and branches as it battles to return the bank to profit and keep it out of majority state ownership.

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Speaking days after reports of 2,000 impending job cuts, AIB managing director Colm Doherty said the bank would be "smaller" in the future and would have "fewer people".

"We have developed a plan. It's currently being finalised and it will restore efficiency to this bank," Mr Doherty said, speaking after AIB unveiled record half-year losses of €2bn.

The bank will begin discussions with "staff representatives and other impacted entities" over the coming months, Mr Doherty added, with the bulk of cuts likely to be implemented in 2011.

"There is a very short payback on the restructuring plan," he stressed in a bid to address any investor concerns about redundancy costs which will be booked next year.

Branch network

The bank boss also hinted that AIB's 270-strong branch network may shrink as part of the impending restructuring.

"We've looked at the entire operating margin in Ireland, that doesn't just mean in terms of headcount, it means in terms of the way we're configured," Mr Doherty told analysts, pointing to the branch structure as "one of the issues".

As well as its branch network, AIB runs 15 business centres, has access to 1,000 post offices through a joint venture with An Post, and operates an online banking portal.

"The configuration of our network has not been looked at for about 20 years so we're looking at it," Mr Doherty told analysts. "We want to ensure that we continue to migrate transactions from the physical infrastructure to the technology infrastructure.

"That's the target of our plan, but more than that I don't really want to say at this juncture."

AIB hopes the restructuring plans will yield a cost income ratio of less than 50pc by 2013, while the bank is also raising borrowing rates to achieve a net interest margin of 180 basis points in the same timeframe.

Mr Doherty said those predictions would form a key part

of the investment case when the bank goes to the market for a multi-billion capital-raising later in the year.

If the capital raising fails to attract sufficient support the bank will have to get the money from the Government, raising the spectre of majority state ownership.

The restructuring plan also hinges on EU approval.

Mr Doherty said discussions were "advanced" with no new "onerous requirements" expected to be imposed.

AIB is also expected to fine-tune its management structure. Mr Doherty confirmed that a review into whether it is appropriate for the bank to have an executive chairman and a managing director instead of a non-executive chairman and chief executive would begin shortly.

Mr Doherty declined to be drawn on whether he would stay in place as managing director if the bank was nationalised.

The bank boss also defended AIB's failure to appoint a chief risk officer, stressing that such executives were "scarce" and would be difficult to woo given the cap on banking salaries.



Irish Independent

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