Shareholders face five-year wait for venture return

PROFITS in Britain were flat last year and shareholders face a longer-than-expected wait for a return from the joint venture with the post office there, Bank of Ireland said yesterday.

The bank's British financial services division, which includes its retail and business banking operations in the North and Britain, saw profits increase by €15 million to €388m, almost 30% of the total for the group.

However, the increase was down to a technical accounting change that released €15m from the division's reserves to pay for bad debts.

Chief executive Brian Goggin said that the bank's British mortgage book had grown by 9% during the year but that "back book repricing" wiped around €45m off revenues.

Mr Goggin said that increased competition meant new loans were attracting lower rates than those that had been taken out in the past.

This meant income streams suffered from older high-rate mortgages being replaced by new ones that were worth less to the bank.

Mr Goggin also that said it would be up to five years before the joint venture with the British Post Office began to deliver a return and that the original three-year break-even target had been "overly optimistic".

The project allows the bank to sell personal loans and other retail financial services through the post office network, which is the biggest of its kind in Europe.

The bank has signed up 100,000 customers so far but plans to attract a total of 400,000 before next March.

But only 20,000 have taken out personal loans, with the bulk of the remainder taking out savings and investment products, which are traditionally slower to deliver profits.

Mr Goggin said the bank had been successful in transplanting its sales culture into the Post Office's outlets and that the savings products were "doing very well".

The bank is also nearing the end of its review of Bristol & West, the former building society that has disappointed in recent years.

Mr Goggin said Bristol & West's 97-strong branch network was "not core" to the bank's future in Britain and that it had received expressions of interest from potential buyers of the branches.

Closer to home, trade union Amicus threatened strike action over the bank's planned job cuts.

The union, which represents 400 of the group's 18,000 staff - mostly in head office and the life assurance and mortgage divisions - said the bank had been "disappointing, underhand and inflammatory" in its approach to restructuring. Talks between the bank and the IBOA, which represents 7,000 staff, are continuing.