Bank of Ireland takes €169m charge for 1,700 job cuts

Customers on payment breaks drop to 20% of original 106,000 payment holidays granted

The bank received more than 2,000 applications last month for its redundancy scheme

The bank received more than 2,000 applications last month for its redundancy scheme

 

Bank of Ireland said on Wednesday that it has taken a €169 million charge to deal with a voluntary redundancy programme that will lead to 1,700 staff departing before the end of next year.

It comes as the bank received more than 2,000 applications last month for the scheme, announced in August.

The numbers leaving the bank, including many part-time workers, equate to 1,450 full-time positions, or about 14 per cent of its workforce, the company said in a trading statement. It originally aimed to eliminate 1,400 roles over the coming years, as lenders across Europe seek to cut costs as they struggle with ultra-low central bank interest rates and weak lending demand, exacerbated by the Covid-19 crisis.

The programme will cut annual staff costs by €114 million when completed.

Bank of Ireland said that new lending rebounded in the third quarter of the year, with Irish mortgage drawdowns rising 30 per cent compared to the previous three months, when the State was in lockdown. However, overall new lending for the nine months to September fell by 25 per cent on the year to €9 billion, reflecting how the economy had ground to a halt earlier in the year.

Financial shock

The bank granted 106,000 loan payment breaks to households and business customers in the UK and Ireland between March and September to help them deal with the financial shock of the pandemic. About 27,000 borrowers extended their payment holidays from an initial three months to six, while 20,000 breaks were still in operation as of the middle of this month – less than one-fifth of the total.

“For those customers that have come off payment breaks, the significant majority have resumed principal and interest repayments. The number of customers requiring additional support is in line with our expectations,” it said, without giving details.

While overall business improved in the third quarter of the year, group chief executive Francesca McDonagh warned that “recently announced Covid-19 restrictions by the Irish and UK governments combined with Brexit present continued uncertainty”.

Group interest income, the main contributor to group earnings, declined by 2 per cent while business income, including wealth and insurance fees and commissions, slid by 19 per cent.

The bank has maintained its outlook for the full year, which has been welcomed by analysts.

Bad loans

The group said in August that it expected to set aside between €1.1 billion and €1.3 billion of provisions in 2020 to absorb an expected surge in bad loans as a result of the Covid-19 crisis. It had booked the bulk of the charge – amounting to €937 million – in the first half of the year.

The bank had also previously forecast a 5 per cent drop in interest income for the full year and for business income to slide by 20-30 per cent.

Davy analyst Diarmaid Sheridan said the three months to September was a “good quarter with trends across the business running ahead of our expectations”.

“The outlook remains unchanged, reflecting the present restrictions across Ireland and Brexit uncertainties, which is an understandably cautious approach to take,” he said. Shares in Bank of Ireland closed 1.3 per cent higher, defying a broader sell-off across European equities, which saw the Iseq slump 2.7 per cent.