BofI to cut 1,400 jobs as Covid-19 drives €937m loans charge
Group launches voluntary redundancy scheme, drawing union criticism
Bank of Ireland is offering four weeks’ pay per year of service, in addition to the statutory two weeks. Photograph: Bloomberg
Bank of Ireland said on Wednesday it would cut more than 1,400 jobs in the coming years to rein in costs. The news came as the bank posted a loss for the first half of the year after taking a €937 million charge for an expected spike in bad debts amid the coronavirus crisis.
The bank has launched a voluntary redundancy scheme which will be open until September 23rd on better terms than had been on offer to parting staff in recent years. Chief executive Francesca McDonagh told The Irish Times she had not set a limit for employees exiting under this element of the plan, but that it would likely be after 2021 before her target of reducing the bank’s workforce to below 9,000 was met.
The decision, which emerged as Bank of Ireland reported a pretax loss of €669 million for the first six months of the year, drew sharp criticism from the Financial Services Union (FSU), which had managed to get AIB and Ulster Bank to stall their cost-cutting plans amid the Covid-19 crisis.
“To be asked to make a life-changing career decision at this time is totally insensitive – at a time when many bank workers are focused on trying to get their children back to school,” said FSU secretary general John O’Connell. “We’re calling on the bank [to] pause any redundancy programme.”
The FSU also wrote to Taoiseach Micheál Martin asking for an “urgent intervention”.
Deloitte Ireland forecast two weeks ago that Irish retail banks were likely to cut 20-30 per cent of jobs – or as many as 7,650 positions – in the next five years as the Covid-19 crisis shifts more transactions online and lenders seek to cut costs as earnings across the industry are being squeezed in an era of ultra-low interest rates and slow loan growth.
Ireland’s five main banks have slashed staff numbers by 45 per cent since the 2008 crash to about 26,500 today.
AIB, which signalled earlier this year that it would cull 1,500 jobs by 2022, and Ulster Bank, which is also looking to reduce the size of its workforce, have both pressed the pause button on their plans in recent months.
Bank of Ireland is offering four weeks’ pay per year of service, in addition to the statutory two weeks, under an enhanced voluntary redundancy package that will become the new standard for the bank. It previously offered just three weeks’ play, plus statutory entitlements.
As a once-off to encourage employees to apply for redundancy by September 23rd, the bank has raised the upper limit on what a departing employee can receive to 2.5 times’ salary, compared with the standard limit of two times’ salary. It has also promised to pay three weeks’ pay in lieu of notice to staff opting to leave under the current programme.
Meanwhile, the bank also said it was carrying out a strategic review of its Northern Ireland unit, which has 200,000 personal and business customers, £2.5 billion (€2.77 billion) out on loan and £5 billion of deposit and current accounts. Ms McDonagh said “all options” were being considered, and refused to rule out an exit from the market.
The bank is also planning to restructure its wider UK business by running down its lower margin mortgage book in that market and focusing on “bespoke” business, such as lending to professionals seeking larger-than-average loans and people looking to take equity out of their homes.
Bank of Ireland’s first-half impairment provision of €937 million was driven as it reclassified a large volume of loans as having become more risky as a result of the economic shock. It compared with a €79 million charge taken in the first half of last year.