Danske Bank Says 150 Jobs at Risk at Irish Unit Amid Exit
Danske Bank A/S (DANSKE), Denmark’s largest lender, said that 150 employees at its Irish unit are at risk of losing their jobs as it exits retail and business banking.
The Irish division has stopped offering personal and business banking products to new customers after an attempt to revive those operations failed, the Copenhagen-based lender said in a statement today. The firm said it will repay customer deposits and continue its corporate and institutional lending.
Danske Chief Executive Officer Thomas Borgen is the latest head of a foreign bank to try and staunch losses in Ireland, where the worst real estate crash in western Europe pushed the economy into recession and prompted a bailout of the industry. Other lenders to unwind businesses include the U.K.’s Lloyds Banking Group Plc (LLOY) and Rabobank Groep from the Netherlands.
“It’s been a very difficult decision, a regrettable decision,” Terry Browne, who heads the bank’s Irish division, said in a phone interview. “But we have to make a hard business decision here based on the unsustainable position we find the retail business banking model in.”
The bank said it expects restructuring costs of the Irish business to impact earnings between 250 million kroner ($46 million) and 300 million kroner over the coming five quarters, with a risk of additional impairments of as much as 500 million kroner over the period. Activities in Northern Ireland are not affected, according to the statement.
Domestic lenders including Bank of Ireland and Allied Irish Banks Plc (ALBK) will benefit as Danske, Lloyds and Rabobank continue their retreat, according to Ciaran Callaghan, a Dublin-based analyst at Merrion Capital.
“This trend highlights the challenges facing the Irish banking landscape as the sector recovers from a severe property crash,” Callaghan said in a note. “However, from a domestic banking perspective, the exit of smaller foreign players strengthens the duopoly position of the large remaining players, further allowing them to reassert their dominance.”
Danske’s revamp of Irish operations included winding down commercial property investments, removing the firm’s branch network and trying to create a “viable” retail business, Browne said. The effort floundered because of low interest rates and a “challenge in acquisition of customers,” he said.
The company will move about 3.4 billion euros ($4.7 billion) of mortgage and business loans into a non-core division, where they will be serviced and perhaps sold, Browne said. Danske’s Irish unit had a pretax loss of 31.4 million euros in the year’s first nine months, the bank said.
“It’s disappointing that Danske Bank is moving to withdraw still further to the obvious detriment of its customers and its staff,” Larry Broderick, general secretary of the Irish Banking Officials Association, said in a statement.
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