Bank of Ireland has signalled a serious reduction in staff numbers over the next three years with up to 700 of its 10,000 staff in the Republic expected to leave the bank. The job losses, which will largely come from its branch network, will be achieved through early retirement and voluntary redundancies, according to group chief executive Mr Maurice Keane.

Announcing a 20 per cent rise in pre-tax profits to €508 million (£400 million) for the six months to the end of September, Mr Keane said the drop in staff numbers was part of a cost-cutting initiative at the bank. Within three years, Bank of Ireland aims to reduce its overall costs by €65 million (£51 million). Mr Keane said up to 65 per cent of these savings will come from staff reductions, with the remainder coming from more efficient use of its workforce and new technology.

The move is part of the bank's continuing efforts to streamline its retail division to withstand competitive pressures.

In a low interest rate environment, the bank's profit margins on core activities such as mortgage lending have been reduced. Mr Keane said yesterday there was pressure on costs across the bank's entire product range. At the same time, the bank is investing in new and more flexible services for its customers which should, in turn, reduce the number of people who have to visit a bank branch.

As Bank of Ireland begins its cost reduction programme, it will also absorb additional staff if its bids for the State-owned ICC Bank and for Ulster Bank are successful. The bank is the only bidder for ICC and expects to know shortly whether its offer has been accepted by the Government. The acquisition would give Bank of Ireland substantial presence in the small and medium sized business banking market but there are very onerous terms attached to the sale.

They include a commitment to maintain staff levels at ICC for at least two years and preserve terms and conditions of employment. Mr Keane said these factors have been reflected in the price the bank has indicated it will pay and he insists there is no question of any trade-off being made between Bank of Ireland's staff and ICC's workforce.