AIB to merge businesses in North and Britain on to one platform

AIB plans to combine its units in Northern Ireland and Britain on to one operational platform this year to drive efficiencies and improve its focus on business banking.

The two arms of AIB's UK operation, First Trust Bank in Northern Ireland and its business banking unit in Britain, currently operate on separate platforms, even though they use the same currency and have the same regulators. AIB now plans to bring them together as part of a project called "One UK".

“We are in the process of combining it into a single operating platform,” Brendan O’Connor, managing director of AIB UK, told analysts at the bank’s capital markets day in London on Thursday. “We are very concerned about being lean and efficient.”

This will include a cut in its full-time staff levels by 180 to 200 of its 1,000 staff and a reduction in direct costs of 15 to 20 per cent, he said.

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Mr O’Connor said the process would be concluded by the end of this year and would include a reduction in AIB’s branch network in Northern Ireland from 30 to 15, which was previously announced.

He said AIB would make greater use of its digital capability in Northern Ireland to win new business and improve the customer experience.

AIB has 363,000 customers and a 1 per cent market share in the UK, which accounts for 11 per cent of the group’s operating profit.

Staff departures

Some 130 full-time-equivalent staff in Northern Ireland will leave the business as part of this process. AIB has also flattened its operating structures and completely “refreshed” its UK management team, with just one person still in situ from a year ago.

AIB has signed a deal with the Northern Ireland Post Office that will allow the bank’s customers to conduct certain transactions through its network. It has also entered the intermediary market to sell mortgages.

“We have not been active in the mortgage space in Northern Ireland for a while but we have re-entered the market in the last number of months . . . and opened up an intermediary channel.”

Mr O’Connor said AIB’s ambition on mortgages was “reasonably modest”. Its mortgage book in the North is currently about £1 billion (€1.15 billion).

He described the Northern Ireland market as “challenging” but said there was an opportunity for AIB to differentiate itself through its business banking offering. He described AIB as a challenger bank in the North and a challenger business and corporate bank in Britain, where it is a niche lender to SMEs.

AIB’s new lending in the UK declined by 20 per cent last year to £1.5 billion. Mr O’Connor said this was partly due to Brexit, with customer demand a “little quiet” in the run-up to the referendum last June, and the bank standing back from some deals.

“We took a decision after Brexit on CRE [commercial real estate] to only lend to our relationship customers and not enter into any new transactions for the remainder of the year. We thought it was the prudent thing to do,” he said.