The board of First Active has taken a first step towards restoring investor confidence in the floundering bank by announcing major changes to its senior management team.
The board has decided Mr John Smyth will remain as group chief executive but has assigned new roles to his two most senior executives, Mr Tony Shanahan and Mr Paul Reville.
It has also indicated it will shortly announce a series of measures to reduce its operating costs. This is expected to include the closure of a number of branches, the restructuring of others into franchise-type operations and staff redundancies.
Under the management reshuffle, Mr Shanahan, who was deputy group managing director and group finance director, moves to the position of deputy chief executive with responsibility for mergers, acquisitions and joint ventures. First Active's group operations director, Mr Reville, becomes director of human resources. Their former positions have been assigned to Mr Cormac McCarthy, who becomes finance director and Mr Richard Hoare, who assumes the role of operations director.
Announcing the changes, Mr Smyth said the reorganisation should help the bank to face the major challenges within the financial services industry.
The former building society is struggling to reassure investors about its future prospects and will be hoping the changes will be sufficient to arrest the decline in its share price. First Active shares closed at €2.37 (£1.87) in Dublin yesterday, down 17 per cent on the 2.25p price at which they were floated last year.
The company has failed to impress the stock markets since its flotation, showing little vision and commitment to diversifying its business base. Almost 18 months after its conversion to a publicly quoted bank, First Active is still largely reliant on the mortgage market for its profits. And in an environment where interest rates are at near historically low levels and new competitors are forcing Irish financial institutions to live with ever lower profit margins, the prospects for significant profit growth at First Active are bleak. Just this week, it has been forced to contend with competition in the savings market from the British bank, Northern Rock, which puts further pressure on its margins.
The board now seems to have prioritised the concept of First Active merging or entering into a joint venture with another financial institution by appointing Mr Shanahan to seek out such alliances. Cost-cutting to make the company more competitive will also be crucial to building profitability.
Mr Hoare will have responsibility for First Active's retail banking business, including its broker network. His role will include the development of new direct and Internet-based services for customers, which should provide a more cost-effective structure for the bank if implemented.
First Active has 72 branches in the Republic and sells mortgages through about 60 agents, including insurance brokers. Last month it closed its branch in Northern Ireland with 11 redundancies, transferring its mortgage lending and deposit business there to its centralised telephone-based operation at Epsom in England.
