As many as one in five of Bank of Ireland's branches could face closure over the next two years as part of a cost-cutting plan, which is likely to see more than the expected 700 of the bank's 11,000 staff leave. The bank, which disappointed the markets yesterday with lower-than-expected profits growth in the last 12 months, has told the Irish Bank Officials' Association (IBOA) that 20 per cent of its branch outlets in both rural and urban locations could be closed by 2002.

Speaking to The Irish Times yesterday, IBOA general secretary Mr Ciaran Ryan said the trade union was "disgusted" that one of the State's major employers was seeking substantial redundancies at a time of unprecedented economic growth. "The number of job losses could well be higher than we originally expected. Nobody knows yet," he said.

The bank has given mixed signals on its plans for its retail branch network in recent months. When it was reported in The Irish Times last November that staff working at its branches would be affected by the cost-cutting initiative, the bank issued a memo assuring staff that this was incorrect.

Yesterday, chief executive Mr Maurice Keane told a press conference that just more than 10 per cent, or around 40 branches, within its urban network could be closed. The IBOA said it had been told that the figure was 20 per cent.

The IBOA suggests the discrepancy reflects the bank's concerns about the likely customer reaction to closures in rural areas.

Mr Ryan says 40 branches would represent closures in the larger cities and towns, with the figure rising when more remote locations are included.

The bank will be mindful of the difficulties which Barclays Bank faced in Britain when it closed rural branches earlier this year and the strong reaction to plans to close rural post offices around the Republic in the past.

Mr Keane said the timing of branch closures would depend on the speed with which its customers switched to using its direct and Internet banking services.

The bulk of the €65 million cost savings - off a current operational cost base of €1.17 billion - would be achieved through reduced labour costs with increased investment in technology making a further contribution.

As part of a reorganisation of the group's activities, the bank has already merged its British and Northern Irish operations and is merging its international banking and treasury units.

Mr Keane refused to state how many jobs had already been affected in this first round of restructuring but said the bank had put severance agreements in place with some staff who would leave over the next three months.

He also stressed the bank would, in the longer term, aim to expand its workforce, pointing to the expected 500 jobs to be created through a joint venture between the bank and the US card payment specialist Nova earlier this week.

Bank of Ireland announced a 10 per cent rise in pre-tax profits to €920 million (£724.5 million) in the 12 months to the end of March, short of analysts' expectations and triggering a drop in the share price yesterday. The shares closed at €7.10, down almost 10 per cent, in Dublin following the results.

After tax, the bank reported a 22 per cent increase in profits to €724 million, benefiting from a reduced tax charge largely due to a higher volume of business being done at its IFSC operation which qualifies for a special 10 per cent rate of tax.

Earnings per share rose by 25 per cent to 68 cents (53.5p), while shareholders will receive a 28 per cent increase in dividends to 23.5 cents per share.