Competition in the retail banking sector is set to intensify with Bank of Scotland (Ireland) promising to open more than 50 new branches by the summer of next year following a €120 million deal with the ESB. Emmet Oliver and Laura Slattery report
The bank has bought 52 of the ESB's shops located throughout the State for about €40 million. It has paid another €80 million to acquire the loan book of the ESB retail business. This consists of about 170,000 ESB customers who have bought goods on long-term deals from ESB.
The bank is promising to roll out several new products in an attempt to get customers to switch from their existing banks. New personal loan, credit card and deposit account products are believed to be in the pipeline.
The move by Bank of Scotland (Ireland) follows the arrival into the Irish market in December of Danish group Danske. It bought National Irish Bank (NIB) and Northern Bank from National Australia Bank for about €1.44 billion.
The deal between the bank and the ESB came on the day an Oireachtas Finance Committee report found that the banking sector was "relatively concentrated into a small number of powerful institutions". It also found that there was "insufficient competition between them and the other providers of financial services".
Mark Duffy, chief executive of Bank of Scotland (Ireland), said the established Irish banks had kept the market to themselves for too long. He also accused them of overcharging customers. He said his bank would put "significant savings" in consumers' pockets, although he did not wish to be specific about what products were on the way.
Since arriving into the Irish market in 1999, Bank of Scotland (Ireland) has put pressure on the established banks across a range of areas. However, the lack of a branch network has made it difficult for it to growth further.
In addition to the €120 million, the bank will spend €30 million refurbishing and rebranding the ESB stores and an undisclosed amount on IT, staff training and marketing. Two ESB stores on Dublin's Fleet Street and Cork's Academy Street are being retained by the ESB for "strategic reasons".
The 400 staff at the outlets will be able to avail of redundancy packages from the ESB, but Bank of Scotland (Ireland) also plans to offer them jobs afterwards. However, unions are seeking an urgent meeting with management to discuss the terms of the deal.
Analysts were yesterday broadly supportive of the deal. Séamus Murphy, an analyst with Merrion Stockbrokers, said it was a "smart move" for the bank.
ESB chief executive Padraig McManus said the shops were failing to hold market share and were facing a tough time in the future. For this reason the company wanted to proceed with the deal.