Bank of Ireland is targeting a €200m reduction in its cost base by 2021, while the lender is to spend an additional €250m overhauling its IT systems. The bank expects to grow its loan book by a fifth over the next three years and wants to reduce its cost-to-income ratio to below 50%. In a strategy update this morning, the lender also announced expansion plans for the UK.
Bank of Ireland's chief executive Francesca McDonagh briefed investors in London today on these plans. Speaking ahead of that briefing, Ms McDonagh said the bank is making a "cost commitment" to the market to reduce the cost base to €1.7 billion over the next three years. She said the bank's culture, IT systems, and business model are all changing, adding that this will lead to a better service for customers.
The bank CEO said that as part of the lender's transformation employees will be departing. "We will have fewer people working in Bank of Ireland in the future," she said without committing to a number.
The lender's CEO said the cost cutting "reflects a large workforce and a lot of investment in our people. "I've intentionally not thought of this in terms of absolute headcount, because my philosophy is about reducing costs to be more efficient and doing the right thing - not hitting some number. It is about being more efficient and giving better service for our customers. We are investing in our customer service and putting people into frontline roles," she added.
On Bank of Ireland's plans to grow its UK operation, Ms McDonagh said it is a market she knows well and is "attractive". She said the company is "absolutely committed to the UK" and the market offers Bank of Ireland "scale and diversity". The British market accounts for 40% of Bank of Ireland's balance sheet, but only 20% of the lender's income. Ms McDonagh said "we are looking at improving some parts of our business that has great potential but could do better".
"We're investing in parts of our business in the UK that are actually very profitable and do very well, and we are repositioning some parts of our portfolio there where we don't see we can get the results we want to deliver for investors in the medium term," she added.
With regard to the threat presented by Brexit, she said Bank of Ireland has experienced "nothing specific or material to date". The bank's chief added that Brexit has dampened "some demand" but that "doesn't undermine our plan".
With regard to the tracker mortgage controversy, Ms McDonagh said Bank of Ireland has made "good progress". "We've now successfully contacted 99% of all customers that were impacted and made an offer of redress and compensation. "We've got 1% to go, we're trying to find those customers. There are 115 customers we are yet to locate, mainly because they have moved away from Ireland".
Speaking in February, Ms McDonagh had committed to contacting all affected tracker customers at Bank of Ireland by the end of March.
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