Scottish bank launches €146m plan

Bank of Scotland Ireland (BOSI)plans to spend £150 million (€146 million) to establish itself as a retail bank in Ireland over the next two years. It has promised to roll out seven new products, including personal current accounts.

The bank, which is part of the Halifax Bank of Scotland group, has announced a 41 per cent rise in pretax profits for 2004 to €148 million on foot of strong growth in lending and deposits.

Announcing the figures yesterday, the chief executive of BOSI, Mark Duffy, said the outlook for this year was equally promising.

Mr Duffy said 2005 would see the bank moving into the retail banking sector providing "real competition" to the main players in the market. "We will have four retail products this year and three more in 2006," he said.

The bank had expressed an interest in buying National Irish Bank (NIB) and Northern Bank from National Australia Bank last summer but did not move ahead with a bid. The banks were subsequently sold to Danske Bank. The NIB business would have given BOSI a retail branch network across the Republic and allowed it to establish a retail presence quickly.

Mr Duffy insisted yesterday that its move into retail banking was not predicated on having a branch network and that the bank would offer its products through alternative channels. This is likely to include the internet and phone and the bank may also enter into distribution deals with other financial institutions.

The bank, which began to sell mortgages in the Irish market in 1999, claims to have secured 6 per cent of that business without the support of a branch network.

Mr Duffy said the bulk of the £150 million would be spent enhancing the bank's information technology systems through which some of the products will be offered.

Last year, BOSI increased lending to customers by 59 per cent to €12.6 billion. Customer deposits rose by 27 per cent to €5.6 billion. Its parent, HBOS, posted a 22 per cent increase in profits to £4.6 billion, helped by strong revenues and controlled costs. The figures were broadly in line with market expectations.

The bank appeared to rule out imminent acquisitions saying that it would begin a share buyback programme this year involving up to £750 million. It has also signalled that its dividend will grow at a faster pace in the future.

Announcing its results, the bank signalled its intention to mount a "serious challenge" to the incumbents in the Irish market. Two of the parent bank's directors have also joined the Irish bank's board.

Last month BOSI's chairman, Mr Phil Flynn, resigned after it was disclosed that he was a director of the company at the centre of a Garda investigation into IRA money laundering.

He has stated that he has done nothing wrong and explained that he stepped down from the bank so as not to embroil it in such publicity.

Mr Duffy refused to comment on the matter yesterday.