Monday 17 December 2018

Bank of Ireland to ramp up tech spending, but could cut 1,500 jobs

Francesca McDongah
Francesca McDongah

Gretchen Friemann

Shares in Bank of Ireland fell yesterday as the market digested chief executive Francesca McDonagh's slew of new strategic targets, unveiled to analysts and investors in London.

The much-anticipated strategy reboot will widen and accelerate the group's upgrade of its technology platform, adding €250m to the €900m cost already earmarked for the vast software overhaul.

The ambitious growth plan is to ramp-up lending by a fifth over three years, while reducing costs - and jobs.

Ms McDonagh also laid out sweeping changes to the UK operations, with a more selective approach to the market in a bid to pump up returns, now languishing in single digits.

Owen Callan, an analyst with Investec Ireland, said Bank of Ireland was styling itself as a challenger bank in the UK, "stepping away from the mainstream banks which have an entrenched position on the high street" - a move he predicts will deliver the same volume in a growing market.

Ms McDonagh said the group "does more business" daily in the UK than Ireland, where its market share sits at 28pc - slightly behind industry leader AIB.

Mr Callan said yesterday's slide in the share price was to be expected after a "big number" capital expenditure hike.

The unexpected increase takes the bank's total investment in a long-running turnaround and modernisation programme - first set in train in 2016 under former CEO Richie Boucher - to €1.4bn. Alongside the rise in spending are ambitious plans to cut the wider cost base by €200m to €1.7bn by 2021, as well as to drive investor returns into double digits from the current 6.9pc.

The bank earmarked €250m to "improve efficiencies and drive down costs", but the CEO side-stepped questions about the extent of those job losses.

Market sources said the headcount is likely to fall by a further 1,500 - a calculation based on the bank's latest figures.

The anticipated redundancies come in the wake of swingeing job losses at the group announced over the past 18 months. Those plans already call for 1,000 jobs to be cut.

Ms McDonagh stressed she has no internal targets for staff reductions and emphasised "reducing costs in a more strategic way is far more important than focussing on a headcount reduction".

Analysis: See page 3

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