Bank of Ireland was founded in 1783 and the premises at College Green, Dublin, of the Irish Parliament, which became defunct on the Act of Union coming in to effect in 1801, were purchased for £40,000 in 1803.

Bank of Ireland today announced it is planning to sell a number of its business divisions, including life and pensions company New Ireland Assurance, the ICS Building Society and its investment management business, Bank of Ireland Asset Management.

BoI said as part of an ongoing European Commission review, a restructuring plan was prepared by the bank and submitted by the Irish Government to Brussels on 30 September 2009. The bank said any such plan is required to contain measures to address an appropriate level of burden-sharing by the bank’s stockholders and bondholders and to limit any competition distortions resulting from any State aid received by the bank as well as an assessment of the long-term viability of the bank.

BoI said  the European Commission will require the bank to effect certain structural and behavioural measures. Accordingly, over the last number of months, the bank through the Department of Finance has been involved in detailed negotiations with the European Commission in relation to the terms of the EU Restructuring Plan. BoI expects the decision regarding the approval of the proposed measures, including the final terms of the EU Restructuring Plan, will be taken by the Commission by mid-2010. Therefore, at this stage, it said there can be no certainty as to the outcome of the State aid proceedings and the content of the final EU Restructuring Plan. However, BoI expects, based on the current status of its negotiations through the Department of Finance with the European Commission that the final EU Restructuring Plan is likely to consist of the key elements below:

Business Disposals

The Bank will commit to dispose of the following businesses, which are briefly described below:

New Ireland Assurance Company plc

• New Ireland is a manufacturer of pension, life assurance and related products for individuals and SMEs.

• New Ireland had approximately €12bn life assets (primarily unit-linked) at 31 December 2009.

• New Ireland distributes product through approximately 1,600 registered brokers and approximately 180 direct salespersons and through the Bank of Ireland network with these distribution channels having an aggregate 19% share of new business within the Republic of Ireland.  

Following disposal, the bank will continue to distribute, but not manufacture, pension, life assurance and related products for individuals and SMEs. 

Bank of Ireland Asset Management Ltd. (BIAM)

• Investment management business headquartered in Dublin.

• Manages balanced and specialist mandates on behalf of institutional clients (including the Bank).

• €25bn assets under management at 31 December 2009.

ICS Building Society

•  Irish intermediary sourced mortgage business.

•  Distribution platform and ICS brand.

• Mortgage loans of approximately €7bn (of which the bank will commit to sell a minimum of €2bn) and deposits of €4bn outstanding at 31 December 2009.

Other Disposals

• The bank will also agree to sell FCE (its US foreign exchange businesses) and its stakes in Paul Capital (asset management) and the Irish Credit Bureau.

BoI is also winding down its UK intermediary sourced mortgage portfolio and also certain discontinued international corporate lending portfolios (comprising approximately 25% of customer lending (including assets held for sale to NAMA) at 31 December 2009).

For the nine months to the end of December, Bank of Ireland estimates that the businesses to be sold off generated total underlying income of about €200m, underlying operating profit of about €90m and contributed about €40m of underlying profit before tax to the bank.

The Minister for Finance, Brian Lenihan, said on March 30th as part of his announcement on recapitalisation of the Irish banks that Bank of Ireland will require €2.7bn in new capital, but it is hoping to meet much if this from private sources.

Goodbody analyst, Ken Darmody, commented: "The businesses had loans of €7bn and deposits of €4bn and underlying operating profit (before impairments) of €90m. In relation to the UK business, it would appear BOI will continue to wind down the UK intermediary mortgage portfolio, as previously mentioned and also discontinue international and corporate lending. Interestingly though, while the company will attempt to accelerate the wind downs of these by way of potential sale, it is not obligated to sell these below book value. If the Bank has not run down or sold these businesses in the UK by Dec 2013 they have committed to meet a target of <100% for Group Loans to Deposits & Term Wholesale funding.

It appears that this ratio would have been 107% at the year end. In relation to the earnings of the UK business, underlying operating profit (before impairments) was €145m for the 9 months to December. While the timing and amount of capital that any of the sales above will generate is unclear, the above guidance on underlying earnings would reduce our sustainable earnings of €1bn in 2014. The final figure would be less than the c€300m combined annualised amount (due to tax and the underlying credit charge). We had previously had a stab and the sale of parts of the UK business and reduced our sustainable earnings by c. €150m. With the RWA relief achieved allowed our valuation to remain at 0.94x TERP adjusted end 2010 TNAV. There is a conference call at 9.30 where we will undoubtedly find get more clarity."