STATE-CONTROLLED Allied Irish Banks has said it plans to close branches following a new deal with An Post to extend banking services throughout the State’s 1,100 post offices as the lender unveiled an update to its plans to restructure the business.

The bank told staff in a 24-page “strategy update” document customers will be able to lodge cheques and deposits at An Post outlets over the coming months in addition to banking services already on offer to AIB customers through the post office network.

“Our distribution network will be enhanced by the new An Post initiative and it will support us in making changes to our current branch network,” the AIB document says. “Regrettably, this means that the number of branches will reduce as part of the move to lower costs. But, through the use of mobile banks and new branch openings in selected areas, AIB will bring banking services to new locations.”

The strategy to close some of the bank’s 270 branches forms part of the plan to reduce costs by offering more services through new technology and to return the bank to profitability by 2014 to attract new investors to reduce the State’s 99.8 per cent shareholding.

“We need to take steps which will ensure AIB is not dependent on State support – and instead is a bank that is largely deposit funded,” chief executive David Duffy said in the document.

“It is important that we can make this transition and attract new investors, allowing us to return funds to our shareholders and the taxpayer.”

AIB is reducing its workforce by at least 2,500, or almost one in every five jobs, and is cutting pay by up to 15 per cent to reduce costs after receiving a bailout of almost €21 billion from the Government.

The bank said it also plans to “adjust lending rates relative to the cost of funds”, according to the document.

“It is not sustainable to produce products and services which cost us more than we earn,” AIB says in the document.

The bank announced a restructuring to a “One Bank” model°, making the bank more focused on customers. This moves AIB away from the “siloed” structure of the boom years which created internal independent fiefdoms, looser lending standards and an overexposure to the property sector.

The bank is being split into four internal divisions to be up and running by September.

AIB is being restructured around customers and the distribution on one hand and products on the other. The former personal and business banking and corporate, institutional and commercial banking divisions will merge into these two new structures.

The bank’s UK business will be run as a separate division, while a new financial solutions group is being set up to concentrate on the problem loan cases, including mortgage arrears, and on the non-core parts of the banks that must be offloaded or wound down.

Former EBS chief executive Fergus Murphy is becoming head of products, Bernard Byrne is head of customers and distribution, Ronan O’Neill is head of AIB in the UK and Peter Spratt is head of financial solutions group.

The other senior members of the new management team include chief operating officer Anne Boden, head of internal audit Dominic Clarke, and chief risk officer Peter Rossiter.

Head of strategy Enda Johnson is taking over the role of head of corporate affairs and strategy, taking responsibility for corporate affairs from Alan Kelly, who is leaving the bank.