BoI bullish over post office venture

THE full benefits of Bank of Ireland’s joint venture with the Post Office in Britain will not be seen for 18 months, the bank said yesterday.

Speaking at the presentation of the group’s half-year results, which were accidentally released ahead of schedule on Wednesday, chief executive Mike Soden said the bank hoped to generate revenues far in excess of its £125 million (€181 million) investment in the new business.

The joint venture will see Bank of Ireland supply personal loans, motor insurance and other finance products through Britain’s network of 16,900 post offices. Mr Soden said products would be gradually rolled out across the network after the initial launch of personal loans in 200 post offices in January. The bank already supplies foreign exchange services to the Post Office, generating profits of £37 million last year, and hopes to build on this success with the extended range of products.

Mr Soden was also upbeat about the prospects for the bank’s share price, which has been criticised for underperforming relative to banks in Britain and Europe, and said it would improve from its current level of €10.73. It reached a high of €14.05 last year. “We’ll have our day, there’s no question about it, but when it will come I don’t know,” he said. Goodbody stockbrokers said earlier this month that the bank had underperformed British banks by 17% and European banks by 32% since March.

The bank said its half-year profits of €640 million, a 7% increase on the same period last year, reflected a strong performance in achieving its key goals regarding organic growth, mergers and acquisitions, management of the bank’s capital and reducing costs. Mr Soden added that the bank was unlikely to make any major acquisitions in the Irish market and that it would look to Britain for potential acquisitions in future. The bank also said its outsourcing arrangement with Hewlett Packard, which was the subject of strike action earlier this year, was of great importance and gave the group greater control over its information technology costs.

Mortgage lending volumes were up 29% on the first half of 2002. Other lending rose by 8% and the bank grew its deposit base by 8%. Net interest income in the Republic of Ireland grew by 5% to €434 million. Pressure was felt on net interest margins, which fell from 2.31% to 2.2%, as a result of stiff competition and lower interest rates. Volatile equity markets hurt the bank’s life and investments business as customers shied away from equity-based investment products.

The bank has lent €11 billion in the Irish mortgage market and a further €22 billion in Britain.