AIB reveals plan to axe rural branches and hike rates
A RADICAL shake-up of the country's biggest bank will mean fewer branches and increased borrowing costs for customers.
State-owned AIB is poised to close many of its rural branches, forcing customers to do more banking at post offices or online.
Some larger branches will also be affected in its 270-strong network across the country.
The bank, which offers some of the cheapest mortgages in the country, said it also plans to hike borrowing costs to bring them into line with rival lenders. AIB currently has the lowest standard variable rate of the country's banks at 3pc.
In a letter to staff yesterday, chief executive David Duffy said: "We will be adjusting the pricing of our lending products to be more in line with our competitors and better aligned to our costs. The bank will no longer chase market share."
Customers will be encouraged to bank over the internet using mobile phone apps and other web-based technologies, or use the 1,100-strong post office network which is expanding its agreement with AIB to offer services such as cashing cheques and creating direct debits.
The closures will be a blow to those living in rural areas where broadband connections are poor and many post offices have already closed.
Under a planned redundancy scheme, staff will start retiring early early next month, cutting the workforce by 2,500 -- or almost a fifth. Further redundancy plans will be introduced in future.
The voluntary retirement scheme was heavily oversubscribed. Staff will be told within weeks whether they have been picked for early retirement and then start leaving in August. Fresh voluntary redundancy schemes may also be introduced.
The bank said cuts to pay and benefits, such as cars and club memberships, had been difficult "but necessary to safeguard the long-term future".
The bank said branches would soon be places where customers go to receive advice about complex products and services such as mortgages, investments or business lending.
The closures are the first tangible action taken by senior management to slash costs in the wake of the banking crisis which forced the bank to sell off its profitable Polish unit, reduce lending at home and beg for a €20bn bailout from the State.
The bank is also looking at outsourcing more operations and plans to cut the amount of money handed over to consultants every year.
"Our objective now is to limit the use of consultants to critical work in highly specialised areas," Mr Duffy told staff in a glossy newsletter sent to all AIB staff.
"Since joining AIB last December, I've been working to identify the key initiatives that will help to return AIB to sustainable profitability."
Mr Duffy plans to reduce the bank's remaining operations to three units by September -- the domestic bank; the UK operations in Britain and Northern Ireland; and a newly created financial solutions group.
The bank also revealed that 280 staff are already helping customers who have run into trouble with their mortgages.
Individual staff will be told "within weeks" where they fit into the new scheme.
A new leadership team of 12 men and just one woman will lead the bank together with a leadership council that will include frontline staff.
Fergus Murphy, former chief executive of the EBS building society that was folded into AIB last year, will take over as head of products in a simplifying of its management structure.