Danske Bank Ireland to exit retail operations here

Thursday 31 October 2013 18.22
Danske Bank Ireland to refocus on its corporate customers
Danske Bank Ireland to refocus on its corporate customers

Danske Bank Ireland, formerly National Irish Bank, is to withdraw from the personal banking market to refocus on its corporate customers. The refocus will result in the loss of 150 jobs in the Republic. 

Larry Broderick, the head of the IBOA trade union, said the job losses at the bank would be compulsory.

"We are shocked at the decision and the lack of consultation with staff and customers. We would ask the bank to reconsider," he stated.

Danske is the second bank in Ireland to announce major changes in the space of a week after ACC announced it is handing back its banking licence.

In a statement, Danske Bank said that day to day personal customer products and services will be withdrawn on a phased basis during the first six months of next year.

The bank said that after a detailed review of its Irish operations, the sale of personal and business banking products to new customers will be discontinued with immediate effect. 

Danske also said that it will now start talks with the banking unions in relation to the impact of the changes on its staff numbers.

In today's statement, the bank said the decision was reached because of the difficult economic and trading environment here, where the bank has failed to re-establish a sustainable retail banking business.

Danske said that from now on it would focus the Irish business towards corporate and institutional clients. 

The bank assured customers today that their deposits will be repaid in full. It said it will write to all customers in the coming weeks to clarify the impact on the changes. Customers would get at least two months notice before any products are withdrawn, it added.

Mortgages and personal loans will continue in line with existing terms and conditions. The bank also said that it will continue to work with customers who are in mortgage arrears in line with existing policy and procedures in place today. 

"Danske Bank will continue to meet its requirements as set out in Central Bank of Ireland codes and this position is unaffected by today's announcement," it added.

The personal banking service Danske operates with An Post will be withdrawn in line with the withdrawal of the bank's personal banking services next year.

Danske Bank Ireland also announced a loss before tax of €31.4m for the first nine months of 2013 today, while it also recorded impairment charges of €22.8m.

"The decision regarding the personal and business banking divisions is necessary to stem the losses that continue to accrue in those units. Against the backdrop of the difficult economic and trading environment in Ireland, the bank has been unable to re-establish a sustainable retail banking business model," commented Gerry Mallon, Head of Danske Bank UK and Ireland.

Denmark's Danske Bank profit misses forecast 

Meanwhile, Danske Bank Ireland's parent bank today lowered full-year earnings expectations and said it planned further job cuts after posting lower-than-expected pretax profit in the third quarter.

Denmark's biggest financial institution last year said it would cut a further 1,000 jobs in addition to the 2,000 cuts in the 2013 to 2015 period that it had already flagged. The cuts announced today are in addition to those.

At the end of the third quarter Danske had 20,039 staff.

"We can see we are trailing in too many areas. As a consequence of a slow top line growth we need to make sure that we are cost effective," chief executive Thomas Borgen told Reuters.

Borgen, who took the job last month, said it was not possible at the moment to say how many jobs will be cut in a 1 billion Danish crown ($185m) cost efficiency drive.

Pre-tax profit from core activities fell to 2.6 billion Danish crowns compared with 3.43 billion in the third quarter last year and below a forecast for 3.30 billion in a Reuters poll. 

Loan impairments from the core activities fell to 1 billion crowns from 1.66 billion in the year-ago quarter and below the average expectation of 1.13 billion in the poll.

The group lowered its full-year outlook for net profit to between 6 billion and 8 billion crowns from earlier guidance of between 6.5 billion and 9 billion. 

Disappointment at Danske Bank Ireland's decision

ISME, the Irish Small & Medium Enterprises Association, has expressed deep disappointment at the decision of Danske Bank to withdraw from normal banking services. 

It said the Irish banking system is not fit for purpose in providing an adequate retail service or development funding for Irish SMEs. This is despite the Government's efforts to encourage, demand and even legislate, its chief executive Mark Fielding said.

"While it is true to say that banks are open, ATM machines are functioning and the banks' PR machine is in overdrive, access to credit for SMEs is deteriorating, application process is lengthening and the general consensus is that the banking system is not playing its part in the economic recovery," he added.

The IFA said the decision by Danske Bank to end its retail operations here is another blow for competition in the banking sector, and places an onus on the Government to keep the remaining banks honest.

"Following on from the announcement by ACC last week, this move by Danske reduces further the options open to farmers, SMEs and consumers who need competitive banking facilities to run their businesses," said IFA President John Bryan.