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AIB plans to cut 1,500 jobs from its workforce as it seeks to accelerate a cost-cutting program in a move the unions condemned as “untimely.”
Ireland’s largest bank, which is mostly state-owned, employs 9,200 people and said yesterday that it would also close and merge branches here and withdraw most of its loans from the UK.
It will restart a voluntary layoff program that was suspended due to the pandemic.
John O’Connell, general secretary of the Financial Services Union, said the announcement “is inappropriate and should be postponed.”
“We are still in the midst of a global pandemic. No major announcements about job cuts should be made at this stage, particularly by a bank that is partly owned by the Irish government,” O’Connell added.
AIB’s decision to go ahead with its plans will see it cut costs by more than 10% by 2023, so that it has an annual cost base of less than € 1.35 billion.
The move came as credit rating agency Moody’s warned of the negative outlook for European banks next year.
He said banks will have to deal with a slow economic recovery, a surge in problem loans and weakened profitability.
To counter this, they will have to accelerate cost reduction and digital investments, Moody’s said in a report released yesterday.
AIB plans to merge a small number of branches in Dublin, Cork and Galway in the first half of next year.
Among the branches to be closed are Westmoreland Street in Dublin, Eyre Square in Galway and Patrick Street in Cork.
The Covid-19 pandemic has rapidly accelerated customer preference for digital banking, the bank said.
The bank said it has seen a 27% increase in daily digital use among customers over 65.
In the future, branch services will continue to evolve “towards sales and consulting,” AIB said.
AIB has also reassessed its future Dublin head office requirements, these buildings currently account for 50% of its total cost of ownership.
AIB earlier this week completed the departure of its former headquarters in Bankcentre, Ballsbridge and will leave the adjacent facilities at Hume House by the end of the year.
With 80% of its staff working from home since the onset of Covid-19, it plans to vacate another three of the six remaining Dublin headquarters locations as leases are renewed in the coming years.
In the UK, AIB’s future focus will be to lend to companies in the renewable, infrastructure and manufacturing sectors. It will come out of small and medium loans in Great Britain.
AIB CEO Colin Hunt said: “Our strategic plan, to be implemented over the next three years, has been influenced by the accelerating effect of Covid-19 on customer preference for digital banking and new emerging trends in how and where our people work. “
“Our increased focus on cost controls, the pursuit of new growth opportunities and our investment in digital innovation will enhance the range of financial products and services for our clients, while generating value for our shareholders and placing the bank on an even stronger footing. solid to meet the challenges that lie ahead, ” he added.
The bank is looking to save additional costs of 150 million euros a year, as it aims to reduce operating costs to that target of 1.35 billion euros by 2023.
In March, the bank said it was targeting 1.5 billion euros of annual costs, excluding one-off items, in its medium and long-term targets.
The bank is also targeting a return on tangible capital (ROTE), a way of measuring profitability, of more than 8% by 2023.
In June, AIB announced a huge € 1.2 billion impact on its balance sheet from the Covid-19 pandemic.
That impairment is overwhelmingly forward-looking and driven by financial modeling rather than realized losses.
It gave the bank a pre-tax loss of € 909 million for the first six months of the year.
“We welcome AIB’s statement, ahead of its investor update, to re-commit to its 8% return target with higher-than-expected cost reductions, the main lever to achieve this,” said Davy’s Diarmaid Sheridan.
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