B of I to integrate asset unit within services

Bank of Ireland plans to merge its troubled asset management arm with its wholesale financial services business. The bank yesterday announced that it intends to create a capital markets division that will incorporate Bank of Ireland Asset Management (BIAM) and wholesale financial services.

Kevin Dolan, who was appointed chief executive of asset management services following the defection of four senior executives to Australian group Perpetual in 2004, is leaving the bank. A statement yesterday said that he was returning to London to rejoin his family.

Denis Donovan, head of wholesale financial services, will become chief executive of the new division.

Analysts are interpreting the move as a downgrading of the asset management business, which has been struggling for the past two years.

In that time, BIAM has lost a significant number of pension fund mandates globally.

Goodbody banking analyst Eamonn Hughes said in a note yesterday that the firm saw the move as a downgrading of the asset management's importance within the bank.

He added that the move would surprise few observers, given the division's performance over the last few years.

"The contribution from this business has fallen back to circa 6 per cent of group value from over double this rate previously," Mr Hughes pointed out.

"The move will also provide less visibility on returns on this business in our models going forward," he said.

However, a spokesman for the bank denied that it was downgrading its asset management business and said that the visibility on the division's performance would remain.

"We think this strategy is for the best. It brings asset management and wholesale financial services into line with the bank's three core businesses, Ireland, the UK and international," he said. The spokesman also said that the bank had done "a great deal" to improve the asset management division's performance.

Over the last two years, assets under management at BIAM fell from €57 billion to €42 billion last month. In the 12 months to the end of last March, it generated a pre-tax profit of €85 million, compared with €125 million a year earlier.

However, the business did look like it was turning the corner earlier this year, when new business increased funds under management by €300 million.

Denis Donovan has been chief executive of wholesale financial services for the last three years.

Before that he was chief operations officer of its global markets business, with responsibility for treasury, offshore and international banking. Before that, he was head of operations at BIAM.

In a statement, Bank of Ireland group chief executive, Brian Goggin, said yesterday's move was a logical strategic development. "This structure provides the coherence and strategic focus necessary to ensure we capitalise on the investment we have made in talent development over recent years," he said.