Tuesday 21 November 2017

AIB eyes tech investment and JVs to survive in disrupted banking market

Bernard Byrne, chief executive of AIB
Bernard Byrne, chief executive of AIB
Donal O'Donovan

Donal O'Donovan

AIB is eyeing investments in new technologies and joint ventures with third parties to help position itself for a new era in banking, chief executive Bernard Byrne said yesterday.

The head of the country's biggest lender said the bank needs to be capable of investing in new technologies, and even new sectors, in future as the nature of banking changes in response to disruptions from technological change and new types of competitor.

"We need to have the capacity to enter material partnerships and joint ventures that we wouldn't have in the past and the flexibility to add capital to support growth," he said.

However, he said the bank must also show it can deliver an attractive return on capital for investors, particularly as regulators insist that all lenders hold more and more capital to protect against future losses.

The AIB chief executive provided no update on the timing of long-delayed sale of shares in the bank, which is a matter for Government, he said.

But those new strategic requirements will be in the minds of prospective new owners of the bank, he said in a speech at a meeting of the Leinster Society of Chartered Accountants.

AIB itself is ready for a partial sale whenever the decision is taken, he said.

"The role of the board and executives for the last five or six years was to fix the bank," he said.

While challenges remain, including €10bn of problem customer loans, the initial phase is over, he said.

"We have fixed the bank, we've done the work, we've remediated the issues and we've made it more efficient. Our challenge now is to move to the next phase."

In the new phase lenders, including AIB, face competition from rival banks but also from new start-ups and the big online brands that are all moving into financial services, he said.

Radical change is happening in banking, he said.

The scale of the Irish banking crisis, which forced AIB to make radical changes, now means its better placed than many European peers to adapt to the changing market, he said.

The bank has seen its total staff numbers plunge from 25,000 to 10,000 after the crash, and taken €540m out of its "run rate" cost base, he added.

Irish Independent

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