Bank of Ireland drops mortgage offering through UK Post Office and ends UK AA partnership

Bank of Ireland said on Tuesday it will stop providing mortgages and personal loans through the UK Post Office and has ended its financial services joint venture with the AA in the UK, as the group it continues to restructure its offering in that market.

However, the Dublin-based bank said in a statement on Tuesday that it will continue to offer savings products with the UK Post Office as it extends a partnership, albeit in a narrower form, that was established in 2003 by a further five years out to 2031.

The move to walk away from offering mortgages through the UK Post Office was largely seen as inevitable by industry observers after Bank of Ireland decided to retreat from mass-market mortgages a few years ago to more “bespoke” and higher-return home loans offered through brokers.

These include mortgages to the likes of professionals seeking larger-than-average loans and people looking to take equity out of their homes.

PTSB most exposed Irish lender to competitive threat from Spanish move into market

---

Stella Li of Chinese car maker BYD: ‘We don’t want to engage in a price war’

---

Will consumers benefit from Aviva entering the Irish health insurance market?

---

Will inheritance cause a problem with my weekly welfare payment?

---

The strategy – as well as currency fluctuations – has seen Bank of Ireland UK’s retail mortgage book contract from €23.4 billion at the end of 2019 to €16 billion at the end of last June. Total UK retail deposits amounted to €14 billion in June. A spokesman for the bank declined to give the breakdown of mortgages and deposits that stemmed from the joint venture.

The UK Post Office said in a separate statement that it now has the flexibility “to strike new deals in the future with other financial providers, particularly with regards to personal loans”. Existing home and personal loan customers are not affected, it added.

[ Former Bank of Ireland executive John O’Beirne joins US fintech Square as Europe head ]

The AA UK financial services joint venture was established in 2015, which included a branded car finance business and savings and personal loan products. Bank of Ireland is led by chief executive Myles O’Grady.

“Recognising the strategic objectives of both the group and The AA have evolved since the partnership was first agreed, the parties have decided to conclude their partnership,” Bank of Ireland said.

“As a result, the group will no longer provide unsecured personal loans and savings products under The AA brand.”

Bank of Ireland has historically originated the vast majority of its UK unsecured personal loans through these partnerships. The group has reduced this portfolio during 2023, with balances expected to be the equivalent of about €1.3 billion by the end of this year. Included in the figure is less than €130 million of personal loans advanced directly by Bank of Ireland. This line of business will also be wound down.

Davy analyst Diarmaid Sheridan noted that Bank of Ireland’s retail UK division has seen its profits increase in recent years it focused on lower-volume but higher-value products.

Bank of Ireland UK is currently led by interim chief executive Dave Sutherland, who was appointed to the role in July, after Ian McLaughlin quit as head of the business to lead UK sub-prime lender Vanquis Banking Group, formerly known as Provident Financial.

Meanwhile, Moody’s highlighted in a note on Tuesday that Bank of Ireland UK’s “bespoke, self-certified and interest only mortgages” represent a “downside risk” for the unit, even if its general creditworthiness is supported by improved profitability in recent times and its strong capital reserves. Moody’s reiterated its A3 rating on the unit’s deposits, which is six levels below its top-notch AAA rating.