Bank of Ireland has moved to temper bonus expectations among staff, as falling interest rates, a potentially large UK car finance compensation bill, and trade risks from US president Donald Trump’s return to the Oval Office in Washington cloud its earnings outlook.
It came as the bank agreed a 4 per cent increase for most staff for 2025 with the Financial Services Union (FSU) on Thursday.
The group, which returned to paying bonuses last year for the first time in 16 years, told staff in an email that the second post-crisis round of performance-related pay will be communicated when it reports annual results on February 24th.
Awards under the performance scheme – which are capped at 10 per cent of an individual’s salary and a monetary amount of €20,000 – depend on three key factors. These include business performance, how the bank is “delivering for all of [its] stakeholders” and the management of risk, according to the lender.
“In 2024 we have continued to make strong strategic progress while managing several challenges, including the changing interest rate environment and competition, along with the need to continue to invest in our business,” noted the staff email, seen by The Irish Times.
“We have also responded to some regulatory and customer-related issues within our UK motor finance business. We will need to continue to focus on these risks and areas of challenge during 2025, along with any further risks which may arise – such as geopolitical risks that could have an impact on international trade.”
The European Central Bank has cut its main deposit rate from 4 per cent to 2.75 per cent since last June and is set to continue to reduce borrowing costs over the remainder of 2025, affecting net interest income across the banking sector.
Bank of Ireland also faces hundreds of millions of UK pounds of refunds, compensation and other costs stemming from a UK regulatory investigation into historic discretionary motor finance commissions paid to dealers, according to analysts. Bank of Ireland has a 2 per cent share of that market. The examination has been further complicated by test cases going through the UK courts system.
Are we at the beginning of Donald Trump’s global trade war?
The bank’s reference to “geopolitical risks that could have an impact on international trade” is being seen as a reference to tariff threats resulting from Donald Trump’s return as US president. Mr Trump made it clear this week that Europe is next in the firing line, after Canada and Mexico secured a temporary hold on tariffs by conceding to his demands for heightened border security.
Workers in Bank of Ireland were left disappointed early last year when they received a maximum of 5 per cent of their salary in bonuses as the lender returned to making performance-related payment for the first time since 2008.
This followed an easing of remuneration rules across bailed-out banks by the government to allow for bonuses of as much as 10 per cent of salary, capped at €20,000. Rival AIB has an official cap on its bonus programme of 5 per cent of an individual’s salary or a monetary limit of €12,700.
Bank of Ireland’s latest pay deal matches a 4 per cent hike agreed by AIB and the FSU for its most of its staff for 2024. Employees at management level in Bank of Ireland will see a 3 per cent increase.
Bank of Ireland has also increased entry-level salaries in the Republic to €29,000 from €28,000 under the new accord, which remains subject to a staff ballot.
- Sign up for the Business Today newsletter and get the latest business news and commentary in your inbox every weekday morning
- Opt in to Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Join The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
