Allied Irish Banks Plc Executive Chairman David Hodgkinson said the country’s second-largest lender may announce job cuts in the first quarter of next year after he completes a restructuring plan for the company.
“The new, smaller structure will mean that we will need less people overall than we have now,” Hodgkinson said this week in an e-mail to employees seen by Bloomberg News. Allied Irish will also set up a “dedicated restructuring function” for businesses which “do not meet the future risk and/or return profile” of the group, he said. Catherine Burke, an Allied Irish spokeswoman, confirmed the authenticity of the e-mail.
Irish lenders are being forced to boost their core Tier 1 capital ratios, which gauge financial strength, to at least 12 percent as part of an 85 billion-euro ($113 billion) international aid package for the country agreed on Nov. 28. Banks will be able to draw on as much as 35 billion euros from the European Union, the International Monetary Fund and Ireland’s own reserves to shore up their capital levels.
Allied Irish, which faces majority state ownership, said Nov. 30 it has been directed by the central bank to raise 5.3 billion euros of additional capital to reach a core Tier 1 capital ratio of 14 percent. This means that Allied Irish, which is already 18.7 percent government-owned, will have to raise a total of 9.8 billion euros by the end of February, including previous capital targets set by the central bank. The 9.8 billion euros is in addition to 3.4 billion euros the company is generating from disposing of Polish and U.S. assets.
Allied Irish employed 24,600 staff at the end of December 2009, according to its most recent annual report. This includes staff in the Polish subsidiary Bank Zachodni WBK SA, which it has agreed to sell.
Hodgkinson, 60, a former chief operating officer at HSBC Holdings Plc, was named Allied Irish’s executive chairman on Oct. 27.
“We are actively engaging with the government and state authorities to ensure that our work remains aligned with the requirements agreed as part of the” international support package, he said. “The review must define the new shape of our businesses and determine the structure and resources we must take to achieve those objectives.”
The government may force investors to share the cost of bailing out the country’s financial system by compelling junior bank bond holders to take losses, according to details of the country’s bailout agreement, published on Finance Ministry’s website on Dec. 1.
“Forced burden-sharing through legislation is possible and legislation is currently being prepared in this regard,” according to the document. A “very deeply discounted liquidity management exercise” may also be “appropriate.”
Allied Irish and Bank of Ireland Plc, the country’s biggest lenders, plan to ask subordinated bondholders to share more of the cost of their bailout, three people familiar with the situation said on Nov. 26.