Bank of Ireland reviews €900m technology plan as new CEO arrives

Bank of Ireland is understood to be reviewing its €900 million information-technology scheme, by far the biggest project inherited by the lender's new chief executive, Francesca McDonagh, who took over on Monday.

Sources said the bank’s board has been overseeing a review in recent months of early spending and results associated with Project Omega, which was unveiled last year and is set to run for the next four years. Some of them indicated that the project has slowed down significantly as a result.

It is expected that Ms McDonagh, a former HSBC executive, will also thoroughly examine the programme, which is designed to overhaul the bank’s ageing infrastructure and cut its cost base, they said.

The Briton sent an email and video message to staff on Monday, saying she was "delighted and honoured" to take up the role, in which she succeeds Richie Boucher, who retired last week after eight and a half years at the helm.

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“I will be out and about as much as possible over the coming weeks and months, visiting our businesses and meeting as many of us as possible across Ireland, the UK, Europe and the US,” she said in the note. The new chief executive also said in the video that she plans to ask staff for feedback and engage directly with customers.

The Financial Services Union's general secretary, Larry Broderick, said that Ms McDonagh has agreed to meet his organisation soon. "This will be a good opportunity to build a stronger relationship with the bank, in the interest of customers and staff," he said.

According to a Bank of Ireland investor presentation in August, Project Omega, which involved the Swiss banking-software company Temenos, is critical to the bank reducing its costs to less than 50 per cent of income over the medium term, from 58 per cent last year.

“Better cost-income ratio”

The Davy analysts Diarmaid Sheridan and Stephen Lyons said in a report published last Friday that although Bank of Ireland investors have "digested the cost" of the IT programme, they have not yet factored in its benefits, including that it will "materially improve" the lender's cost-income ratio and return on equity.

The bank said on Monday that the IT investment programme “continues to make progress”. “Important milestones relating to technology developments have been met this year, alongside the ongoing simplification of products and propositions and the group-wide development of digital capability to meet changing customer behaviours and preferences,” a spokesman said. “A further update to the market will be provided in the context of our full-year 2017 results.”

One Goodbody analyst, Eamonn Hughes, said in a note to clients on Monday that he expects Ms McDonagh to outline fresh medium-term financial targets as early next year, when the bank publishes its full-year results.

Mr Boucher’s departure comes two months after the bank confirmed that it expects to return to paying dividends next year for the first time in a decade. Mr Hughes said he believed the new chief executive was committed to the dividends plan.

Shares in Bank of Ireland have dipped 1 per cent so far this year, giving the company, in which the State continues to hold a stake of almost 14 per cent, a market value of €7.5 billion.