Thousands of jobs to go as big banks slash costs
Published 10/02/2010 | 06:34
THOUSANDS of jobs are now on the line as other banks gear up to follow yesterday’s decision by Bank of Scotland (Ireland) to dramatically slash costs.
The UK-owned bank is making 750 workers redundant as it closes 44 Halifax retail branches.
It claimed the operation was “too small’’ to succeed in a tough economic climate. It is the first case of a bank here resorting to compulsory redundancies since the financial crisis began.
The two main domestic banks, AIB and Bank of Ireland, are expected to reduce staff numbers significantly later this year after relying on natural wastage up to now. That accounted for more than half the 6,000 job cuts announced over the past 14 months.
Unions and analysts now fear that it is only a matter of time before both unveil redundancy schemes.
A senior banking analyst said: “The two main banks are coming under increasing pressure in this regard, particularly as they are looking to raise billions of euro of capital in the market in the coming months.”
Between them the big two employ 25,000 people.
They are looking for ways to cope with escalating losses that stem from property loans and higher wholesale funding costs.
Recently, the managing director of AIB, Colm Doherty, hinted that job cuts may be on the way.
“Our current costs are too high for the level of revenue we expect to generate,” he said, adding that “tough decisions’’ would be needed to reduce the workforce further.
Union sources also believe that an expected merger of EBS and Irish Nationwide over the coming months, and a further tie-up with Permanent TSB, could lead to up to 1,000 additional job losses.
Another threat to jobs in the industry is the number of foreign- owned banks that may follow the example of Bank of Scotland (Ireland). The Dutch owners of ACC Bank said they see no future in Ireland, while Danish-owned National Irish Bank recently announced it was closing 25 of its 58 branches.
Yesterday’s announcement will also be watched by many of the country’s developers who have large loans with Bank of Scotland (Ireland). Among well known borrowers of the bank are Bernard McNamara and Liam Carroll.
The bank said any customers facing difficulties would be managed by a Dublin-based business support unit (BSU), which would try to return customers to “good health’’.
Developers in financial difficulty could face having loans called in or refinanced at higher charges. Many of the property and development loans are also being managed by the BSU.
Developers who have loans with the bank will not have these loans placed into NAMA, the toxic loan agency. This agency is only handling loans from banks guaranteed by the Irish Government.
The Bank of Scotland (Ireland) decision will also reduce choice for consumers. Financial adviser Justin O’Gorman, of myadviser.ie, said that less competition would lead to higher fees and charges.
“One fewer competitor in the system means that those left behind can increase margins more easily, which isn’t good news,” he said.
The Department of Finance said last night the bank’s decision was “very disappointing”.
But it added: “Unfortunately, this announcement reflects bank restructuring worldwide, with institutions withdrawing from markets which are not profitable for them.”
The bank last night insisted that customers do not need to do anything at this stage and that their savings and investments remained secure. It will start writing to affected people, including 50,000 credit card customers and 50,000 current account users, to explain what steps they should now take.