Thursday 20 June 2019

Bank of Ireland tipped to cut up to one in five jobs in shake-up

Bank of Ireland CEO Francesca McDonagh.
Bank of Ireland CEO Francesca McDonagh.

Gretchen Friemann

Bank of Ireland looks set to take a scythe to its workforce - with potentially 2,180 jobs on the line as the lender chases cost-reduction targets.

The projected cuts to the payroll are included in a new research note on the group by Investec Ireland's Owen Callan, who retained his 'buy' rating on the stock and described its recently-unveiled medium-term growth strategy as "ambitious" but "attainable".

But Mr Callan calculates the drive to lower operating costs by about 10pc by the end of the 2021 financial year "implies an underlying headcount reduction of 15-20pc".

He noted that while this is a "sensitive issue both politically and with unions, [it] is the required payoff for an investment programme which will cost around €1.4bn and take almost five-and-a-half years to complete".

At the end of 2017, Bank of Ireland employed about 11,000 staff although it has seen a steady stream of departures over the past 12 months.

It is understood the group intends to cull over 200 roles from middle management by the end of the year, although new bank CEO Francesca McDonagh has previously insisted that she has no internal job-reduction targets.

At the bank's Capital Markets Day in June, Ms McDonagh unveiled an extra €500m to its capital expenditure and investment outlay, taking the total figure to €1.4bn. The news precipitated a fall in the lender's share price and prompted questions on how an additional €250m would be deployed to generate "business model changes".

A further €250m was allocated to the ongoing overhaul of the group's technology platform.

But Mr Callan argued shareholders should look "past the noise created by the now upsized investment programme" and claimed the group is capable of delivering an 11pc return on tangible equity in FY21E with "further improvements arriving thereafter".

He said the ramp-up in lending targets was ambitious but attainable. He described the bank as "midway through a transformational journey" that was "aimed at ensuring the business can survive and eventually thrive in an industry beset by legacy business model issues, continual regulatory cost increases, and an uncertain economic outlook".

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