Ulster Bank staff must be dreading Thursday when Ross McEwan, chief executive of its parent company Royal Bank of Scotland, will outline the results of its five-month strategic review of group operations.
The Telegraph newspaper in Britain has reported that about 20,000 jobs will be cut at RBS to bring its headcount to below 100,000 for the first time in years.
As I wrote in yesterday's paper, no "big bang" announcement on job cuts and branch closures in Ireland is expected when McEwan says his piece. Those details will likely follow at a later stage.
In January, the Irish Bank Officials Association didn’t sugar coat its concerns about RBS’s restructuring in a circular to members. It warned that staff could face compulsory redundancies, outsourcing, pay cuts and branch closures. It said measures might include outsourcing of certain functions, the closure of additional branches or departments, changes to pay and terms and conditions, and the introduction of “new, inferior contracts”.
It will probably prove to be right on most if not all of these points, although the company has at least moved in recent days to indicate that it will engage with the IBOA on its restructuring. Cold comfort for staff but it might help to mitigate some unpalatable measures.
McEwan’s focus on Thursday is expected to be on strategy and putting the customer front and centre of everything it does.
The biggest bank in the world by assets before the global financial crash in 2008, RBS’s future will almost certainly be more UK (and Ireland) centric with less focus on its international operations. There will likely be talk of various customer initiatives and a major investment in technology to bring it up to snuff in this digital age and to avoid the embarrassing outages it experienced in the past couple of years.
The lack of specifics about job cuts and branch closures this week doesn't mask the fact that Ulster Bank will be streamlined over the next couple of years. We already know from an announcement in November that £9 billion of assets are being moved off its balance sheet by RBS into a "bad bank". These will be run down over three years.
Outsourced
Separately, 110 jobs involved in retail mortgage arrears collections are being outsourced to Edinburgh.
In July of last year, executives from the Irish institution gave a snapshot to investors of what Ulster Bank might look like by 2016, when it is expected to return to the black. The plan is to have a “streamlined footprint”, which involves cutting the branch network from 238 north and south of the border to between 175 and 185. Its headcount would be reduced from the current level of about 5,600 to between 4,000 and 4,500 full-time equivalents.
The bank’s plan is to reduce its costs by up to £65 million a year from the £521 million recorded in 2012 and to get its cost-income ratio down to 50 per cent from about 60 per cent currently.
By 2016 it expects the “majority of transactions performed via direct channels and next generation ‘lite’ branches and kiosks”. As it is, only about 16 per cent of transactions take place in branches.
It is to be a “significantly smaller organisation with highly efficient and effective decision-making processes” and a flatter management structure. Its product range will be “simplified” and mirror those offered by RBS in Britain.
It remains to be seen if all of that translates into the bank offering a better service to customers and a viable alternative to AIB and Bank of Ireland, the Big Two in the Republic.
There was a time not long after the crash in 2008 that Ulster fancied its chances of breaking the dominance of AIB and Bank of Ireland in retail and business banking in the Republic. It was wishful thinking. Its own slew of bad lending in the bubble years dashed those hopes and has left it chasing bad debts all around town.
It's no wonder the Government is so keen to bring in external, non-bank funding into the Irish market. This is taking a number of guises, such as the funds co-investing in projects with the National Pension Reserve Fund, the cheap lending available from the European Investment Bank for infrastructure projects, and the much-heralded KfW bank from Germany.
Bringing KfW into the market here allows us to piggyback on its AAA rating and its links with the German sovereign to tap cheaper funding for SMEs. Yet none of that can replicate a universal bank serving 1.3 million customers from 135 branches and 840 ATMs nationally, which is what Ulster Bank does in the Republic. There will be painful cuts at Ulster Bank following Thursday’s announcement. For the sake of the economy, we can only hope they won’t be too deep.
