Des Crowley, Bank of Ireland's head of domestic banking, tells Siobhán Creaton, Finance Correspondent, there are obstacles but the outlook remains good.
Des Crowley, the 43-year-old chief executive heading Bank of Ireland's domestic banking business, is keen to stress just how difficult it is these days for bankers to keep making large profits.
Mortgage and deposit interest rates are at historically low levels and just when the bank had been making progress in switching customers away from more expensive cash-based transactions the Minister for Finance imposes a punitive stamp duty on all debit and credit cards.
Mr Crowley is responsible for Bank of Ireland's 270 branches and its Internet and telephone banking operations. Together they contribute about 27 per cent of the bank's entire profits. In the six months to the end of September 2002 this division's profits swelled by 11 per cent to €189 million. Despite the adversity Mr Crowley and his 14,000 staff have to overcome on a daily basis, analysts are confident the business will continue to deliver good profit growth in the months ahead.
But Mr Crowley is not a happy man. The new stamp duty, that will apply on all cash, laser and credit cards, has really annoyed the Co Kilkenny-born banker. "I find it hard to understand that in an economy that wants to be more electronically based and wants to get people to use online systems and telephone banking why we have got such a large stamp duty. No other country in the world has such a high charge, certainly not in Europe. I am very unhappy. I understood that our vision for the country was to try to reduce the amount of cash in the economy."
He is further irritated that his customers will blame the banks for making it more expensive to use their cash and credit cards. "It's an incredible increase in costs. One of the things that worries me is that Des Crowley is one of the people seen as putting on this tax. It is nothing to do with me," he says.
Mr Crowley points out that the bank's average current account customer pays around €40 a year in bank charges. This is also the amount of money credit card users will have to pay annually in stamp duty. A further €20 a year will be imposed on ATM and laser cards which will prompt many people to surrender some of these now very expensive cards. He says the bank has looked at ways it might help to alleviate the stamp duty burden for its customers but believes this is not going to be possible.
Regardless of this irritation, Bank of Ireland has this week announced the rollout of 500 new cash machines at Musgrave's Supervalu and Centra supermarkets throughout the Republic with a commitment to place around 75 of them in rural locations.
It aims to have 100 of these machines installed by the end of next month and Mr Crowley stresses this does not signal any further reduction in the number of bank branches in these areas.
Over the past four years Bank of Ireland has closed up to 45 branches as part of a rationalisation process to reduce costs. "Looking five years ahead we are happy with the number of branches in the east of the Republic. There are some branches where population movements could mean that we would have to move the location rather than close. Some service levels will be moderated but the number of branches will not change dramatically in the future."
Closing branches is something that banks across the world embarked on as they focused on delivering services to their customers through cheaper and less labour intensive means such as over the telephone or the Internet. Many now believe this was a mistake and resulted in the loss of local interaction with customers and hampered their ability to cross sell other products such as life assurance and investments.
"The UK banks did not value the branch manager. In our view the branch manager and staff are the face of the banks in the localities. If you take out a lot of those people then the customers don't respect you. We see the branch and the branch manager as crucial. When cross-selling some of the more complicated products, particularly investments, people want to go and talk to someone they feel they can trust," he says.
But the bank, like other financial institutions, has some work to do if it is to restore the trust of many of its customers who are now being pursued by the Revenue Commissioners for using bogus non-resident deposit accounts to evade tax in the 1980s and 1990s. Lots of these individuals claim they were actively encouraged by their local bank staff to open these accounts and some may yet pursue the banks through the courts for compensation for bad advice. All of the financial institutions are now also handing over details of these account holders to the Revenue on foot of High Court orders.
Bank of Ireland customers have been among those who were alerted by the bank to the fact that they could shortly feature on the Revenue's radar. The bank paid €38.7 million to the Revenue in 2000 in unpaid Deposit Interest Retention Tax (DIRT) plus interest and penalties in relation to the bogus non-resident accounts it held on behalf of thousands of customers.
"One of the things that bothers us is that this happened back in the 1980s. It was a totally different environment then. I am not at all condoning it and a very small proportion of our customer base were involved in bogus non-resident accounts. Customers got three possible opportunities to clean the slate. This is very much a residual issue. We feel we have fully discharged our duty at this point in time and we now want to get on with our banking relationships."
Another bugbear for Mr Crowley is the regulation of bank charges by the Director of Consumer Affairs. Under this regime the bank has not been allowed to increase its charges for the past nine years, he says. Not withstanding these challenges the bank's retail operations are expected to continue to thrive and remain a core source of profit for Bank of Ireland.
