BoI offloads Bristol & West for €218m

BANK OF IRELAND has sold its struggling Bristol & West branch network in Britain for €218 million (stg£150m).

The bank said yesterday it would offload the former building society’s 97 branches and its deposit book of around stg£4.5 billion (€6.75bn) to Britannia, the number two building society in Britain.

Britannia will close around 30 of the branches and operate the remainder under its own brand, but said there would be no forced job losses when the deal is completed later this year. Bank of Ireland will retain the Bristol & West brand and its existing mortgage business.

The deal will give a once-off boost of around €130m to the bank’s profits but will have only a marginal effect on future earnings. The network, which serves 850,000 customers primarily in the south and west of England, had struggled to break even and recorded a loss of €0.6m last year. The bank’s cost/income ratio, a key measure of group-wide profitability, is expected to fall from 55% to 54% thanks to the stripping-out of costs associated with the branches. Its current cost-cutting programme, which will get rid of 2,100 staff, aims to get this figure below 50%.

BoI chief executive Brian Goggin said the deal was “an excellent result” for the bank and for customers and staff of Bristol & West branches. “The disposal delivers on a key commitment set out by us last November. To sell at a good price to a quality institution, while enhancing the offering to customers and maintaining employment, is good news for everyone,” he said.

Analysts were broadly happy with the deal and said it would free up management time to focus on other problems facing the bank. The bank’s share price was largely unchanged.

The disposal means Bank of Ireland’s business in Britain will concentrate on mortgages, business banking and a joint venture with the Post Office to sell personal financial services through the post office network. Britain accounted for profits of e388m last year, around 30% of the total for the group. Mortgages and business banking each provide half of British profits, but Mr Goggin has said the Post Office joint venture will remain in start-up mode for some time and it could be up to five years before it gets into the black.

The venture has been hit by stronger-than-expected competition and a slow take-up of personal loans.

Britannia said yesterday’s deal would bump up its customer base from 2.2 million to over 3 million. “Britannia sees great scope to increase revenues by offering Britannia’s competitive product range through the Bristol & West branches,” the company said.

The deal is similar to Bank of Scotland’s €120m swoop in Ireland earlier this year for 54 ShopElectric stores owned by the ESB.