First Active is expected to announce the closure of a number of branches, the restructuring of other branches into franchise-type operations and staff redundancies as part of a plan to cut costs. The moves, seen as one element of its response to the fall in profits on mortgage business following the recent arrival in the market of Bank of Scotland with a 3.99 per cent variable mortgage rate, are expected to be announced within weeks.

Market sources said that the former building society could close up to 12 branches and that the management at some of its existing branches could be invited to become franchisees of the company. By franchising out some branches the company would longer carry the cost of running them or employ the staff involved who would become employees of the franchisee.

First Active refused to comment yesterday. "We have not publicised plans to do anything. We have said we will be announcing a range of initiatives at the end of the month", a spokesman said.

First Active has 72 branches in the Republic. In addition First Active sells mortgages through about 60 agents including insurance brokers and auctioneers throughout the State and has a specialised broker centre in Dublin which deals with large brokers, mainly auctioneers and estate agents.

A source from SIPTU, the union representing First Active employees, called for cost-cutting "at the top". "We are seeking a meeting as a matter of urgency with management. Our people need to know where they stand. Any cost-cutting should start at top management, that is where they got it wrong. Small cuts at the top would make a big difference to costs but there would need to be heavy redundancies among the employees to make the same difference", he said.

The publicly quoted company feels it necessary to take initiatives to become more competitive in a market which was rocked last month by the arrival of the Bank of Scotland offering a variable mortgage rate up to 1.5 percentage points less than other market players. With its share price languishing at less than the flotation level and no diversification or acquisition activity since flotation, First Active management is now under pressure to justify the decision to convert from mutual status to a publicly quoted company.

First Active recently revealed that it is closing down its branch in Northern Ireland with 11 redundancies. Mortgage lending and deposit taking in the Northern Ireland market will be run from First Active's centralised telephone-based operation at Epsom in England from November 1st.

First Active has about 1.3 per cent of the Northern Ireland mortgage market with about £22.4 million of new business written in 1998, up 13.5 per cent on the previous year while sterling deposits in Northern Ireland rose by 9 per cent. It operates from one branch and deals with about 18 agents - auctioneers and estate agents. "Our scale was too small to sustain the full operation and we already have a sterling operation", the spokesman explained. Some of the existing agents will continue to put business with First Active, while others will not, he said.