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Bank of Ireland shares surged yesterday after it extended its partnership with the UK Post Office until at least the end of 2026.
The tie-up "will continue to focus on providing an exclusive Post Office branded range of savings, mortgages and personal loans" to about 2.1 million Post Office customers in the UK. The two also have 50-50 joint venture, First Rate Exchange Services, the UK's biggest consumer foreign exchange provider.
Bank of Ireland has more than three million UK customers across its businesses there.
In May, the bank appointed Ian McLaughlin to head its UK arm. He was previously Royal Bank of Scotland's managing director of home buying and specialist banking.
At an investor day last year, Bank of Ireland CEO Francesca McDonagh outlined a strategy to double returns generated by its retail UK arm, which has been followed by exits from its UK credit card business and Post Office current account business.
The new Post Office structure moves from a commission-based agreement to sharing returns, that is better for Bank of Ireland, Davy Stockbrokers said.
"We understand that the new agreement moves away from a commission payment structure, where the Post Office receives payments based on product sales, to one that is based on returns generated by the partnership," Davy's Diarmaid Sheridan and Stephen Lyons said in a note to clients.
"In addition, we understand that the new agreement will provide better optionality to BoI in the future, as the asset and liability mix included in the partnership has been redefined, providing a better balance if the partnership was not extended."
BoI shares were up 5.4pc by Friday afternoon, at €3.58, one of the steepest climbers among Irish-listed shares.
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