Wednesday 20 November 2019

UK unions in threat to Bank of Ireland's Post Office deal

A customer uses an ATM, operated by Bank of Ireland, outside a post office in London
A customer uses an ATM, operated by Bank of Ireland, outside a post office in London
Donal O'Donovan

Donal O'Donovan

Postal unions in Britain want the government there to scrap Bank of Ireland's deal to provide banking services through the UK Post Office.

A report by Cass Business School for the UK Communications Workers Union (CWU) argues the UK government should set up its own Postbank service to replace Bank of Ireland.

The union said a state-run Post Bank could be set up with the aim of boosting financial services to SMEs and rural communities.

Owen Callan of Investec said the report suggests it would cost as much as £2bn (€2.2bn) to buy out Bank of Ireland's stake in the Post Office partnership.

It would be bad news for Bank of Ireland, he said.

"We would view Bank of Ireland's UK business as a key long term strategic asset, particularly given the experience of incoming CEO Francesca McDonagh who may seek to expand it further. The partnership with the PO is a very important element of their overall UK business, in terms of access to customer deposits without the need for a stand-alone bank network in the UK, and any suggestions that this may be under threat would obviously be a concern," Mr Callan said.

He said he was sceptical the current Conservative government would back a nationalisation plan in the near term.

The market shrugged off the risk, with shares in Bank of Ireland up slightly to €6.80.

However, in the longer term however, a potential Labour government in Britain, especially one led by left-winger Jeremy Corbyn, could be more likely to back greater state involvement in banking - including potentially through the Post Office.

In the report for the CWU, Prof Barbara Casu Lukac of Cass said that buying the banking business would help the Post Office to remain self-funding.

The UK is an important long-term business for Bank of Ireland, generating up to a fifth of all profits.

It is likely to be a key focus for incoming Bank of Ireland CEO Francesca McDonagh, whose background is in UK retail banking.

The Post Office banking tie-up alone provided €15bn of Bank of Ireland's total deposits, and the business there ranges from mortgages to foreign exchange.

Irish Independent

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