B of I set to continue UK joint post office venture

With 540,000 new customers signing up to do business with its post office joint venture in the UK over the past 12 months, Bank of Ireland chief executive Brian Goggin has decided the time is ripe to extend the arrangement to 2020.

Mr Goggin has yet to see a return on BoI's £125 million investment but the signs are encouraging.

The bank said yesterday that Post Office Financial Services (POFS) now has one million customers - as many as Bank of Ireland has in Ireland.

BoI published a raft of statistics about activity at POFS. It now has 500,000 insurance customers. It is an insurer to one in 200 homes and one in 50 cars in Britain. It has 275,000 savings customers and almost £2 billion in deposits.

POFS's credit card has attracted more than 200,000 customers. The bank is also in the process of rolling out about 4,000 ATMs at British post offices.

Mr Goggin said the joint venture entered profitability in the second half of the year to the end of March 2007.

POFS recorded a loss of €8 million last year compared with a loss of €22 million a year earlier.

Mr Goggin said he expected the venture to be "modestly profitable" in the current financial year due to substantial marketing costs aimed at establishing the business. The bank was looking at ways of cross-selling products to customers, who to date have typically only taken one product from POFS.

"We'll be piloting the distribution of mortgage products later this year," he said. The post office venture in Britain is one part of Mr Goggin's plan to boost overseas profits to the point where they account for the majority of BoI's annual surplus.

At present, Ireland contributes about 60 per cent of BoI's profits, with Britain accounting for 29 per cent and the United States the balance.

"We are looking at ways of growing our non-Irish earnings," Mr Goggin said.

In Britain BoI has a mortgage arm, a successful business banking division and a foreign exchange business with a 30 per cent share of the market.

"We were the fastest-growing business bank in the UK last year," Mr Goggin said.

In the US, its activities are focused around asset management and specialist lending and financing. The group obtained a banking licence in the US last October to enable it to raise funds in the marketplace.

Mr Goggin said it was keen to expand its capital markets business in the US. "In terms of the US, our strategy will be very much an organic growth story."

He said the company would look at acquisitions in the US in its specialist areas. His other key priority was to continue to reduce BoI's cost/income ratio. He wants to reduce it to the mid-40s over the medium term.

BoI's cost/income ratio fell by three points to 54 per cent last year and is set to decline to 50 per cent by March 2009. This would make it the leanest full-service bank in Ireland in terms of its cost structure.