Commission tells BoI to sell key assets by 2014

BANK of Ireland must dispose of key assets by the end of 2014, share its facilities such as ATMs with smaller competitors and make it easier for its customers to change banks.

The changes were agreed as part of the restructuring plan for the bank approved by the European Commission to ensure the state’s €3.5 billion aid does not interfere with fair competition in the sector.

In Ireland, it will sell its New Ireland Assurance Company plc, Bank of Ireland Asset Management Ltd, ICS Building Society, FCE — its US foreign exchange business — and its 17% state in Irish Credit Bureau.

They contributed about €40 million of underlying profit before tax to the bank for the nine months to the end of last year.

New Ireland has an aggregate 19% of share of new business in the country and life assets of about €12 billion at the end of last year.

Bank of Ireland Asset Management Ltd, whose sale is already under way, had €25bn worth of assets under management for institutional clients, including the bank, at the end of December last.

The ICS Building Society had mortgage loans of about €7bn, of which Bank of Ireland has committed to sell at least €2bn, and deposits of €4bn, at the end of last year.

It must reduce its presence in the British corporate lending market when two of its current loan portfolios are run down.

These contributed about €60m profit before tax in the nine months to December. It retains niche businesses in France and Germany.

The bank also undertakes in the restructuring plan to repay the state the recapitalisation sum.

Competition Commissioner, Joaquin Almunia, said he was confident that the plan would ensure a stable future for Bank of Ireland and open the Irish banking market up to new entrants.

As well as the €3.5bn granted by the state in March 2009 in return for preference shares, the bank has also transferred loans with a book value of €12.2bn, including an aid element of about €1bn.

The approval of the plan was welcomed by Bank of Ireland and by Finance Minister Brian Lenihan who said it was an endorsement of the Government’s strategy for the recovery of the banking sector.

After recording a pre-tax profit for the year ending March, 2008, of €1.93bn, the bank reported a loss of €1.47bn for the final nine months of last year after booking impairment charges of just over €4bn on bad loans.