The State plans to enter the mortgage and personal credit markets through an An Post-backed joint venture, but the company yesterday refused to reveal its investment in the new business.
An Post and Belgian bank Fortis announced yesterday that the Government has approved their plans to launch a 50/50-owned retail banking service through the State company's 1,400-strong post office network.
The deal means that from early next year, State-owned An Post will offer consumers mortgages, insurance, credit cards and other financial services through the post office network.
In a statement yesterday, An Post said both parties planned to invest "heavily" in the new business. However, An Post's chief executive, Donal Connell, refused to say how much the taxpayer-owned company was putting into the venture as it was "commercially sensitive".
An Post's financial services operations, One Direct and Post Point, will become part of the new business, which means that it is surrendering ownership of these operations in return for 50 per cent of the new venture. Fortis will be contributing capital and expertise.
An Post's chairwoman, Margaret McGinley, told a press conference that the company had these businesses valued as part of the process of negotiating the joint venture together.
"We were very happy with the valuation," she said. However, she refused to say what it was.
An Post lost €47 million in 2003 and was forced to cut over 1,000 jobs in a rescue plan designed to return it to profitability. The company made a small profit last year, but has not paid a dividend to the Exchequer for several years. The joint venture will employ 250 people initially, rising to 500 over five years. Workers will transfer from An Post to the new business, but Mr Connell said that this would not affect their existing pay and conditions.
He said that the partners would be required to invest in training staff, but would not say how much this is going to cost.
The joint venture will have to seek approval and licensing from the Irish Financial Services Regulatory Authority before it can begin selling its services.
Mr Connell was yesterday unable to say how the self-employed postmasters, who operate An Post sub post offices, would be regulated when they begin selling financial services, such as insurance and mortgages, through these outlets.
"We will be getting full regulatory approval," he said. "We will be going through the full process. They [ post masters] will be regulated." However, he could not say if they would be treated as brokers for the bank.
Mr Connell also said that An Post was not concerned about the fact that it was entering the mortgage market at a time when interest rates were increasing and property was believed to be reaching a peak.
"That is all speculative - the Irish economy is very, very strong," he said.
