Irish banks could cut up to 30% of jobs as customers go online – Deloitte

Irish retail banks are set to cut up to 30% of jobs – the equivalent of 7,650 jobs – over the next five years as the Covid-19 crisis moves more transactions online and lenders seek to bring under control costs in an era of ultra-low interest rates, according to Deloitte Ireland.

In a new report on the future of banking, the consulting firm said customers’ overnight switch to digital banking during the coronavirus pandemic will accelerate their IT transformation. However, the scale of the cost reduction to come would cause tensions among shareholders, he said, as the government continues to hold significant stakes in AIB, Bank of Ireland and Permanent TSB after the bailouts of the crisis.

“Profitability will remain the main challenge for banks. Lower interest rates for longer and the evaporation of traditional commission income streams will depress returns, and aggressive cost control may be the only real lever for banks to improve profitability in the short and medium. long term – while also responding to the operational and strategic challenges posed by Covid-19, ”said David Dalton, Head of Financial Services at Deloitte Ireland.

“In light of these challenges, Irish banks are likely to continue to trade with deep discounts to book value, and tension will exist with shareholders as banks look to balance their profits and do the ‘right thing. “by supporting their communities as the recovery gathers pace. In progress.”

Deloitte’s prediction that 20-30% of bank job cuts follow Ireland’s top five banks downsizing by 45% since the 2008 crash to around 26,500 today. This happened when the size of banks’ combined loan portfolios shrank by more than 50% with the sale of unwanted and problematic assets and borrowers repaid their loans at a faster rate than taking out new ones. debts.

Analysts at stock broker Davy predicted that the three surviving banks rescued by taxpayers from the Republic are on track in the coming weeks to report a total of 525 million euros in net losses for the first half of the year. 2019, as the economic shock of Covid-19 hits new loans and forces banks to put money aside to cover an expected increase in bad debts.


According to Davy, Bank of Ireland, AIB and Permanent TSB are expected to record € 1.03 billion in bad debt provisions, as the industry enters loss territory for the first time since 2013.

Banks have also seen their net interest margins – the difference between the average rates at which they finance and lend to customers – tighten in recent months as customers increase their savings at a time when banks already have too many deposits. and face a negative situation. interest rate when placing excess cash with the European Central Bank.

The losses come as banks began to engage with tens of thousands of customers who took advantage of temporary payment interruptions of up to six months during the crisis, to assess which borrowers will not be in. able to repay regular payments previously contracted and will need their loans to be restructured.

“Collaboration with affected borrowers will limit any accumulation of [non-performing loans in the second quarter], and we are encouraged by recent preliminary data from the Banking & Payments Federation Ireland that only 60% of people on the first three-month payment break have extended it, ”said Davy analysts Stephen Lyons and Diarmaid Sheridan.

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