Bank of Ireland joint venture unlikely to be affected by Royal Mail flotation

Bank of Ireland’s well-performing financial services joint venture with the British post office is unlikely to be affected by any partial sale or flotation of the Royal Mail next year.

According to the Financial Times, the British government is set to begin the privatisation of the Royal Mail towards the end of 2013. Although still too early to judge, this could either see the service partially sold or floated on the London Stock Exchange. It is thought that Britain’s coalition government prefers the flotation option, but hasn’t ruled out the prospect of seeking a sale to an industry buyer or a private equity buyer.

Much depends on an improvement in the climate for initial public offerings plus whether or not the Royal Mail’s own finances continue to gain strength.

Whatever the outcome, the actual Post Office network is expected to remain in the public sector, according to the Financial Times, and may be mutualised.

Bank of Ireland has run a joint venture with the post office in Britain for the past eight years, with it growing to be one of its best performing operations. It currently has 1.5 million depositors.

Eamonn Hughes of Goodbody Stockbrokers remarked yesterday that “the retention of the Post Office within the public sector will likely ensure continuity for the joint venture, with minimal implications from any cost drives at the Royal Mail”.

“In the past year, the venture has been very successful in growing deposits, and accounted for the bulk of the €8bn deposits growth at Bank of Ireland in the second half of last year,” added Mr Hughes.