Bank chief has given clear pointers on job cuts, writes Siobhán Creaton, Finance Correspondent.

Brian Goggin pledged to be a relentless cost cutter when he took over the running of Ireland's second biggest bank last year and is now ready to wield his axe across the organisation.

His promise to investors is to squeeze savings of €120 million a year out of the Bank of Ireland group over the next three to four years.

By the end of this month he hopes to have agreed a road map with the Irish Bank Officials Association on how some 2,100 of its 17,000 staff will leave the organisation and how its business will be restructured.

It will cost the bank around €210 million to achieve these savings. It intends to spend a further €40 million investing in technology and automation.

In its current financial year, the bank is targeting to deliver €30 million in savings, rising to €75 million in 2006/07 with a €105 million cost reduction by the end of March 2008.

Yesterday, Goggin was reticent about revealing the details of where exactly the job cuts will fall while its discussions with the Irish Bank Officials Association are ongoing. But he did provide some clear pointers.

Its retail banking operation, where its ratio of cost to income is the highest within the group, will bear the brunt of much of the cost cutting. Mr Goggin said that 40 per cent of the cost savings will come from this division which underpinned much of Bank of Ireland's profit growth last year.

A further 40 per cent will be delivered by the bank's plan to streamline many of its support services while it believes that another 20 per cent of these costs can be achieved by consolidating some of its other functions.

Over the coming days and weeks much of the negotiations between the bank and the IBOA will be spent teasing out the details of this programme and trying to ensure that redundancies will be sought on a voluntary basis.

As they move towards a conclusion Labour Relations Commission chief executive Kieran Mulvey will chair the negotiations and all parties are working towards reaching agreement by the end of this month.

These discussions are being conducted at a time when Bank of Ireland has delivered yet another stellar set of results. The group's profits are up 10 per cent to €1.4 billion with its retail operations delivering the biggest growth in profits to €490 million, up 17 per cent on last year.

Strong growth in lending was the key driver of its success with mortgage lending up 27 per cent, personal lending up 21 per cent and business lending ahead by 23 per cent.

Overall retail banking's total income rose by 10 per cent to €1.3 billion, ahead of a 7 per cent increase in operating costs.

The retail bank is facing an unprecedented level of competition and Goggin says he wants to create a low cost operating model so the bank can thrive in this environment.

National Irish Bank's new owner, Danske Bank, has made it clear that it intends to make its presence felt here. The Dutch Rabobank has begun to sell new products to Irish consumers and Bank of Scotland Ireland is laying the foundations to open a branch network across the Republic.

New switching codes, introduced by the financial regulator, are designed to make it easier for consumers to move their current accounts to other financial institutions. Bank of Ireland said it has lost some business in recent months to rivals, some of which are offering no charges, but has no plans to match this offer.

The bank is keen to emphasise that while staff numbers will fall dramatically, its service to customers will not be affected as it will be putting more people at the front line to deal with them.

Goggin's plan has been well received by investors and if fully implemented has the potential to enhance the share price and leave the group well positioned for the future.

He says the Strategic Transformation Programme is critical to achieve Bank of Ireland's plan for growth and development.

Apart from this initiative Goggin and his team are facing other challenges.

One area of concern is Bank of Ireland's asset management business. This has long been viewed as the jewel in the group's crown and one of the key attractions for any financial institution eyeing up the bank as a potential takeover target.

At the end of March it had €46.9 billion in funds under management, down 18 per cent on the previous year. In April it was notified that a further €700 million would be lost.

The poor performance of certain large US pension funds combined with the departure of some of the bank's top fund managers has prompted the withdrawals. At the end of March 2004 US funds accounted for 40 per cent of Bank of Ireland's asset management business. A year later this has shrunk to 21 per cent.

Goggin insists it is continuing to win new business, particularly in Ireland, and suggests that the Bank of Ireland asset management problem is a short-term phenomenon that will right itself within two to three years. He remains very proud of this business, he said, and dismissed any notion that it might consider selling it.

The bank is also addressing issues with its UK businesses.

Its Bristol & West branch network is likely to be sold within the next couple of months.

While its joint venture with the UK Post Office is proving slow to deliver on expectations, Bank of Ireland had hoped that profits from this business would be driven by loans it could advance through this network. It is now taking the view that selling its savings and investment products is a better bet, something that will take a bit longer to generate profit growth.