Bank of Ireland said on Friday it has extended its financial services joint venture with the UK Post Office, which was formed in 2003, to at least the end of 2026.
The partnership will continue to focus on providing a Post Office branded range of savings, mortgages and personal loans with 2.1 million customers in the UK. The current deal was set to run out in 2023.
The UK Post Office accounted for €14 billion, or 18 per cent, of the group’s deposits at the end of June, according to its latest report. It also makes up a major portion of its €21.6 billion retail UK loan portfolio, though an exact breakdown is not provided.
Mark Spain, director of group strategy and development, had been in charge of negotiations on the extension, according to sources.
The joint venture is key to Bank of Ireland chief executive Francesca McDonagh’s target, unveiled in June last year, of expanding the group’s UK loan book by 10 per cent and doubling its profitability – measured as return on equity – by 2021 as part of a series of financial targets.
The target is premised on the UK exiting the EU with a withdrawal agreement and transition arrangements in place.
The lender also offers products in the UK through the AA and brokers.
Bank of Ireland named former Royal Bank of Scotland executive Ian McLaughlin earlier this year as the next chief executive of its UK division. He will succeed Des Crowley, who is due to retire in the coming months.
The group’s UK growth strategy is being driven by an increased focus on higher loan-to-value mortgage offerings to first-time buyers and equity-release loans to seniors, which are seen as more profitable than mass-market products.
In June, Bank of Ireland agreed to sell its capital-intensive UK credit card portfolio at face value of about £530 million (€597m) to special purpose investment vehicles advised by affiliates of Centerbridge Partners Europe LLP and Jaja Finance.
The portfolio comprises the Post Office, the AA and Bank of Ireland’s branded consumer credit cards.
The bank also exited unprofitable Post Office ATMs and current accounts in the first half of this year.