Bank of Ireland has agreed to sell its underperforming Bristol & West branch network and the associated £4.5 billion (€6.5 billion) deposit base in Britain for £150 million in cash.
The sale of the 97-strong network brings to an end a review at Bank of Ireland that began two years ago. The bank said yesterday that it would book a profit of about £90 million after tax on the deal, with the gain to appear in full-year results next May.
It is expected that the sale will be "earnings-neutral" for the bank in the future, although it will help to bring down the group's cost/income ratio.
The market welcomed yesterday's announcement, with Bank of Ireland's shares rising by 10 cent to close at €12.70 last night.Analysts were positive on the price the bank achieved for the business.
Merrion Stockbrokers said the disposal reflected well on Bank of Ireland management because it highlighted their ability to complete a transaction at a good price and would allow them to concentrate fully on the group's remaining UK businesses. These operations include a joint-venture with the UK post office.
The sale will have come as a particular relief to Brian Goggin, who identified disposal of Bristol & West as a key priority when he took up the chief executive job at Bank of Ireland last year. He said yesterday that the deal was "good news for everyone".
The only negative aspect of the sale to be highlighted by analysts was the loss of the £4.5 billion savings book that is associated with the branches.
Commentators at Goodbody and Davy pointed out, however, that the bank was currently on a roadshow for the second of a series of asset-covered securities, with this issue expected to raise €2 billion in new funding.
The sale of the Bristol & West branches and deposit base will be effected through a business transfer scheme and will not require the approval of Bank of Ireland shareholders.
When it is complete, the bank will retain the Bristol & West brand and all of the building society's other businesses.
These operations, of which the main component is a mortgage business, contribute about half of the profits that Bank of Ireland draws from its UK operations.
Last year, these UK profits amounted to £265 million.
