First Active's chairman and acting chief executive, Mr John Callaghan, has indicated a new chief executive could be installed at the former building society within two months. The bank has instructed KPMG to undertake a trawl in an effort to find a high-calibre chief executive with the vision to secure the company's future success.
The new chief executive will be taking on a serious challenge. He must convince the market that the bank is making strides in the right direction and deliver tangible results fairly quickly.
While all financial stocks are struggling at the moment, as fund managers switch investments into the hi-tech sector, First Active has much ground to make up before shareholders have something to smile about.
Mr Callaghan insists many of the company's problems are driven by the gulf between the perception of the bank and the reality in terms of its day-to-day business. He points to the 1999 results as evidence that it can survive in a highly competitive market and is consistently winning new high-quality business.
"We know what has to be done and we feel we are doing it. We have good products and are looking forward to the future with confidence," he said yesterday. First Active has moved swiftly to address the relatively high-cost structure within the organisation, which will yield significant annual savings in the future. It has achieved its target of 175 job losses, has already closed a third of its branch network and is ending its association with 90 of its agents throughout the Republic.
But with a cost/income ratio of 63.4 per cent, the bank is under no illusion that further inroads will have to be made into its cost structure if it is to boost profit growth. Mr Callaghan said the bank did not envisage the introduction of another significant cost-cutting drive in the medium-term but accepted that this view might not necessarily be shared by a new chief executive.
While the branch network is very expensive to operate, it still remains crucial when it comes to selling financial services products to customers. Increasingly, First Active intends to complement the branch structure by providing comprehensive telephone and Internet access to customers but it will be some time before these channels deliver significant business to compensate for widescale branch closures.
It is also switching out of less profitable areas, such as the provision of current accounts and credit cards and reviewing whether it can afford to maintain ordinary demand deposit accounts in a low interest rate environment.
It must also look to forge a partnership with another institution. Mr Callaghan says it is not in discussions with any other institution at the moment but is continually evaluating potential acquisitions.
Shareholders will have to be patient.
