Stocks fall as banks reveal job cuts

SHARES in Bank of Ireland and in Irish Life and Permanent, which are planning massive job cuts, fell yesterday, while shares in AIB, which is recruiting 200 extra staff, rose.

Bank of Ireland chief executive Brian Goggin is expected to announce 2,000 job cuts today in a drive to deliver annual savings of €130 million in a rationalisation move that will cost the company €200m in restructuring costs.

And Irish Life and Permanent’s banking arm, Permanent tsb, has offered a voluntary early retirement package to its 100 branch managers as part of a wider restructuring programme, that could result in a reduction of up to 10% of its 2004 workforce. The bank’s restructuring moves this year are expected to cost €14m but deliver annual savings of €14m by 2006.

AIB Bank is currently recruiting 200 bank officials as it seeks to beef up customer services following over zealous staff pruning.

The markets reacted to Bank of Ireland’s proposed job cut initiative by marking the shares down 7 cents to €12.33, a 0.56% fall. Irish Life and Permanent shares closed at €13.97, down 13c, a 0.92% fall. And AIB shares closed up 12c at €15.92, a 0.76% rise.

BOI boss Brian Goggin flagged plans late last year to slash costs to bring the bank’s cost-to-income ratio below 50%, in line with industry peers, from 55%. It is expected that Ireland’s second-largest company by market value will cut 2,000 positions by integrating some operations and outsourcing others.

The bank declined to comment but industry sources told Reuters that the figure, which represents about 12% of the bank’s total workforce, was accurate.

Irish banks are facing increased competition from new entrants to the Irish market that are subsidiaries of powerful foreign banks.

In 2003, Royal Bank of Scotland, which owns Ulster Bank, bought Ireland’s oldest building society, First Active, and last year Denmark’s largest financial services company, Danske Bank, bought National Irish Bank for €1.4 billion.

Just last week, Bank of Scotland announced plans to expand its Irish retail business by buying the ESB’s 52 branch retail network and its appliance purchase loan book for €120m, gaining access to about 180,000 Billpay customers.

When Bank of Ireland releases its pre-close statement today bank analysts with the stockbroking firms will also be looking for any update on Bank of Ireland’s plans for its Bristol and West deposit-taking operation in Britain.

Bristol and West has been the subject of repeated takeover speculation after Mr Goggin said in November its under-performing branches would not be allowed to weigh on the group as a whole.

The bank is also expected to update the market on the performance of its asset management business, which suffered a sharp loss of business following poor investment performance along with the loss of key staff.

Mr Goggin said in February the pace of outflows from Bank of Ireland Asset Management (BIAM) had slowed significantly. BIAM saw a net outflow of €2 billion in the six months to September 30 and outflows continued in October.

Additional reporting Reuters.