Union claims BOI plan threatens 1,000 jobs

BANK of Ireland plans to sell off such assets as ICS Building Society and New Ireland Assurance in a move the Unite union said will put 1,000 jobs in jeopardy.

The announcement that it plans to dispose of several high-profile businesses and a number of its subsidiaries yesterday resulted in its shares falling 1 cent, or 0.58%, to €1.71.

Irish Life and Permanent is understood to be considering an offer for parts of the group.

Bank of Ireland is looking for buyers for New Ireland Assurance and the mortgage company ICS Building Society, as well as its US foreign exchange business FCE.

Analysts gave the move the thumbs up yesterday but Unite has expressed fears that up to 1,000 jobs could be under threat.

The units involved employ 1,000 staff between them, of which 750 are members of Unite.

Bloxham analyst Kevin McConnell said the positive surprise is the bank is managing to keep the deal with the British Post Office.

“Bank of Ireland has a joint venture with the Post Office. It reiterated it was winding down its UK intermediary-sourced mortgage portfolio and also certain discontinued international corporate lending portfolios.

“It said it would attempt to accelerate the wind-down of these portfolios by selling them, but would not be obliged to sell at less than book value,” he said.

The measures, which will be implemented by December 2014, won’t be “materially detrimental”, the bank said.

Bank of Ireland and AIB submitted restructuring plans for European Commission approval after the Government’s combined €7 billion bailout.

The commission will probably make a final decision on Bank of Ireland’s plans by mid-2010, it said.

Mr McConnell said: “Today marks the final pre-funding announcement from Bank of Ireland, in our opinion, clearing the way for the bank to go to shareholders with its capital-funding plan, possibly within days.”

The units to be sold or wound down contributed a combined €100 million to Bank of Ireland’s pretax profit in the nine months through December 2009.

Under the plan, the lender will agree not to make discretionary payments of coupons or to exercise voluntary call options on hybrid capital securities from February 1, 2010, to January 31, 2011, the company said. It will also agree not to make any “material” acquisitions.

NCB analysts said the path is now clear for Bank of Ireland to stage its “multipronged recapitalisation” plan in the near-term.

The asset sales will not have a direct impact on the bank’s capital base.

However, clarity on what it needs to sell, together with last the launch of NAMA, will allow it to hone its plans for raising capital, it said.

Bank of Ireland chief executive Richie Boucher said: “Events are now much more in the Bank of Ireland’s control as to how we go about strengthening our capital.”

The bank — in which the Government has a 16% stake, plus an entitlement to another quarter via preference shares — remains in talks with investment banks on raising capital, Mr Boucher added.

New Ireland Assurance handles life insurance and had around €12 billion in life assets. Other anticipated disposals are of Bank of Ireland Asset Management which had €25bn under management, and ICS Building Society, which had mortgage loans of about €7bn.

In addition, the bank expects to sell its FCE foreign exchange business and its stakes in Paul Capital (asset management) and the Irish Credit Bureau.

“This is only a one-year switch-off, which is less than for Lloyds and RBS for example,” said credit analysts at Royal Bank of Scotland.