BoI seeking up to 600 job cuts as it reduces UK mortgage sales

BANK OF Ireland is seeking to cut up to 600 jobs in its 4,000-strong UK workforce by ending the sale of mortgages through brokers in a bid to cut costs and reduce its dependence on the wholesale funding markets.

The bank said in a statement that in future it would only sell residential mortgages through the bank's joint venture with the UK Post Office and through its 44 branches in Northern Ireland.

Bank of Ireland did not reveal how many job cuts it was seeking, saying the changes would be subject to consultation with staff. "We are aiming to achieve cost savings of circa £30 million [€33 million] per annum with a one-off restructuring cost of circa £40 million."

The saving amounts to 600 jobs among the 1,000 staff who work in the bank's UK residential mortgage business, although the final number of job losses will depend on consultations with staff.

The bank intends to close two of its three "back-office" mortgage centres in England - in Reading outside London and Solihull near Birmingham - and move any remaining staff at both operations to the bank's centre in Bristol.

Bank of Ireland sells about £10 billion in new mortgages in the UK every year. This will fall to about £2 billion following the changes.

Analyst Scott Rankin at Davy stockbrokers said the move signalled "the end" of Bank of Ireland's British retail banking presence, which dated back to the Bristol West acquisition in 1996.

The bank said the changes were in line with the strategy outlined at its half-year results in November "to reduce dependency on wholesale funding through selective balance sheet deleveraging and to rigorously manage our cost base".

In response to the financial crisis, Bank of Ireland, like most other banks, is "deleveraging" - reducing the amount it borrows - and lowering its loans-to-deposits ratio, which stands at 145 per cent.

This means that, for every €1 it has taken in on deposit, it has loaned out €1.45 to customers.

This has forced the bank to borrow heavily in the wholesale funding markets, which have become dislocated and much more expensive due to the crisis.

"As a result of this deleveraging strategy, our UK residential mortgage book, which stood at £29 billion at September 30th, 2008, is expected to reduce significantly over an extended period of time," it said.

Bank of Ireland aims to cut its British mortgages, which account for 57 per cent of its overall mortgage book, by about 50 per cent over the next five to six years.

Its total loan book stands at close to €150 billion.

Richie Boucher, head of the bank's operations in the Republic, told an Oireachtas committee last month that it had to make tough decisions about its overseas operations because of the need to reduce the size of its balance sheet. He said the bank could still continue to grow lending in Ireland by reducing its loans-to-deposits ratio overseas.

The Irish Bank Officials' Association said the announcement was "extremely disappointing".

"It is clear that cost savings on this scale cannot be achieved without a significant adverse impact on staff," said the association's general secretary Larry Broderick.