POSTBANK, THE joint venture between An Post and European bank BNP Paribas, has announced that it will close at the end of the year due to loss-making savings rates being offered in the highly competitive Irish deposit market.

The company is the second retail banking business in as many weeks to announce its closure following the decision of Bank of Scotland (Ireland) to shut down Halifax, with the loss of 750 jobs.

The bank said that it hoped to secure “a significant proportion” of the 260 jobs at Postbank.

Some jobs may be relocated to An Post as it will continue to offer life, motor and home insurance products, though the semi-state company has itself been cutting back on staff over the past year.

Postbank will stop taking new banking customers from Monday, leaving an estimated 130 staff working on the banking side of the business at risk. The bank said that management will “prepare a plan for a professional and orderly wind-down of the bank”.

The bank has deposits of €450 million and 170,000 customers. It has 70,000 savings and 35,000 current accounts, 90,000 insurance policies and 10,000 credit-card customers.

The bank said it would be contacting customers in the coming weeks with “information on the options that will be open to them”.

Margaret Sweeney, chief executive of Postbank, said the bank would develop “detailed plans over the coming weeks”.

The sale of the deposits and current accounts was one of the options to be examined. Customers’ savings were secure and continued to be covered by the Government guarantee, Ms Sweeney added.

The Financial Regulator said it would work with Postbank to ensure “the orderly management” of the bank’s wind-down and to ensure customers’ interests were protected in accordance with the consumer protection code.

An Post savings accounts are not be affected by the closure.

The decision to close the bank was made “jointly” by An Post and BGL BNP Paribas, which is based in Luxembourg, said Ms Sweeney.

“It is regrettable, it had carved out a niche for itself,” she said.

Thierry Schuman, chairman of Postbank, said several factors led to the decision to close the bank, including “the unprecedented circumstances in which the financial services sector finds itself, the highly competitive savings market within Ireland and the absence of a perspective of profitability in the current market circumstances”.

Ms Sweeney said the business was loss-making for the bank’s two shareholders as it was operating in an extremely competitive market where banks were paying “a significant premium” over the ECB rate of 1 per cent.

“It was a pure start-up – we were a bird flying with one wing at the moment with just savings products, but we had planned to start lending to customers.”

Steven Fitzpatrick, general secretary of the Communications Workers Union, said the decision to close the bank was “a major missed opportunity to provide straightforward banking services to ordinary people” through the most extensive branch network in the State, An Post’s post offices.

Fine Gael TD Kieran O’Donnell said the closure showed that the Government’s bank strategy was “unravelling”.

An Post set up Postbank three years ago with an investment of €56 million from Benelux bank Fortis. The bank operated from counters in 1,000 post offices.

Fortis was taken over by French group BNP Paribas in a state-supported rescue during the financial crisis last year.