First Active cuts staff, branches to meet competition

First Active is seeking 175 job losses and will close 25 of its 76 branches throughout the Republic as part of an aggressive cost cutting initiative to make it more competitive.

The former building society is optimistic it will be able to secure 175 voluntary job losses by the end of January, but if this target is not achieved, a mandatory red undancy programme will be introduced, according to the group chief executive, Mr John Smyth.

The majority of the job losses will be from the bank's customer services personnel, many of whom work in First Active's branch network. Overall, First Active is seeking 113 redundancies among these employees, a 17 per cent reduction in its entire customer services staff. Some 19 assistant managers and supervisory roles or 22 per cent of these employees will also be cut.

A further 31 branch managers and head office managers are also targeted to leave the company. The bank will also slim down its executive and senior management team with 12 positions to be dropped.

Mr Smyth said that when these redundancies take effect, First Active will employ just over 700 people.

The 25 branches which are to be closed include 11 in the Dublin area. Outside of Dublin, the bank is closing branches in Limerick, Cork, Clare, Galway, Offaly, Waterford, Wexford, Kerry, Donegal and Tipperary.

Six of the branches closing will be franchised out as loan stores, with the number of these outlets expected to rise to about 20 by the end of 2001.

Over the next four months First Active is also closing its agency network, which comprises 90 agents, with 18 agencies to be converted into mortgage brokers.

The total restructuring programme will cost First Active €26 million (£20.5 million) and will be accounted for in the 1999 profit and loss account. The measure is expected to trim €13 million off First Active's costs structure annually.

Mr Smyth said the measures were being introduced in response to increased competition in the mortgage market in the Republic, which had led to sharp reductions in profit margins.

First Active, which is almost totally reliant on the Irish mortgage market for its profits, has been operating with a much higher cost structure than many of its competitors. Mr Smyth explained that the job reductions and branch closures should ensure the company had a much lower cost base from which it could grow its revenues in the future.

The company will be hoping its cost-cutting programme will restore investor confidence in the bank and will help to underpin a stronger share price.

Since its flotation, First Active's share price has struggled with the shares now worth less than when they were floated last year. The shares improved marginally on the announcement yesterday closing at €2.40, up five cents.