BoI to call for debate on future of banking sector at Oireachtas committee

Bank of Ireland is to call for a debate on the future of the country's banking sector following the exit of Ulster Bank from the market.

In an opening statement prepared for the Oireachtas committee on finance, which the bank is due before today, chief executive Francesca McDonagh will tell TDs and senators how Ulster Bank's parent NatWest's decision to exit the Irish market reflects the realities of a "challenged sector and has thrust the dynamics of Ireland's banking sector further into the spotlight".

It was announced last month that Ulster Bank, the third-biggest lender in the State, is to be put into wind-down, marking the biggest development in the banking market since the height of the financial crisis.

Ms McDonagh will tell the committee that Bank of Ireland is “fully” committed to taking part in such a debate.

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Branch closures

She will also defend the bank’s recent decision to reduce the number of physical branches it has by 88 from 257 to 169 from September onwards.

“I have seen our branch announcement interpreted as the bank using reduced footfall caused by the pandemic as an excuse to close branches. This is not the case,” Ms McDonagh will say.

“Customer trends have been moving in one direction ever since the advent of mobile technology and online banking. While changes in customer behaviour – across a range of sectors – have been accelerated by the pandemic, the migration to digital has been a reality in banking for many years.”

Ms McDonagh will outline how the bank will retain 169 branches nationwide with customers also able to bank at the post office.

According to the bank, in the two years before the Covid crisis the number of people visiting branches fell by almost a quarter. Footfall at the branches scheduled to close is down even more, by about 60 per cent since 2017.

“The change reflects the reality that we have reached an inescapable tipping point in customer preference between online and offline banking,” Ms McDonagh will say.

She will add that the bank recognises that some vulnerable customers will need additional assistance with it having already started to directly contact many of these to discuss challenges they may face.

The State still retains a 14 per cent shareholding in Bank of Ireland, with the institution having returned about €6 billion to the exchequer.

Davy

Ms McDonagh will also make reference to embattled stockbroker Davy, which has been put up for sale. Ms McDonagh will tell the committee that the bank “notes the decision by the board of Davy to proceed with a sale of the company. A commercial process is now commencing within the market and we are not in a position to comment further on that process.”

Payment breaks

She will also tell the committee that some 97 per cent of Bank of Ireland customers who sought payment breaks of up to six months due to the coronavirus pandemic have now returned to making regular payments. More than 100,000 payment breaks granted, only a small number sill require support.

Ms McDonagh will tell politicians this reflects both the resilience of the Irish economy and the range of fiscal supports provided by the Government during the crisis.

Ms McDonagh will admit that 2020 was a “challenging year” for Bank of Ireland, which recently announced a €374 million underlying loss before tax. She will also cite the impact of increasing competition on the sector, including from fintechs and international financial services firms. She will speak of the need for the bank to continue to invest in its digital offerings to attract and retain customers.