£35m bill for bank’s British plan

BANK OF IRELAND expects the outcome of a review of its British financial services division to cost it £35 million to implement.

In a trading statement yesterday the bank said that it has been reviewing the position of its financial services arm but believes it is an important source of future profits and will remain part of the group.

BoI says arising from the review of operations a wide range of income enhancement and cost reduction initiatives have been identified.

The reorganisation of the business is expected to result in annual cost savings of £30 million when completed.

But the implementation of the reorganisation programme is expected to result in a number of exceptional charges over a two year period totalling £35m. Part of this charge will come in the current half year.

Davy Stockbrokers, which is owned by Bank of Ireland, says the review of the British operation announced yesterday may not please some investors.

“The UK review is welcome but may disappoint those investors who were looking for something fairly radical.

“From what we can see at this stage, it will not be the much touted catalyst for helping to substantially re-rate the shares.”

But Stuart Draper, analyst at Dolmen Butler Briscoe said: “The details of this new strategy should reassure investors that future UK ambitions are purely organic and that there is no risk of another major takeover bid being made in the UK, following last year’s failed approach to Abbey National.

As a result, the announcement could act as a positive catalyst for the share price.”

Overall, the UK Financial Services division is expected to report high single-digit percentage profit growth in constant currencies.

“Business reorganisation and the expansion of high potential activities are targeted to achieve above trend revenue growth and the division is projected to deliver consistent high single digit percentage profits growth.”

Following the collapse of preliminary talks to acquire Abbey National, in Britain last year, some brokers had expected the bank to exit the market entirely by selling off its Bristol & West mortgage business.

Earlier this year BoI made several changes to its independent financial advisers (IFA) arm, which resulted in nearly 300 job losses.