Ms Francesca McDonagh:

I thank the Chairman and members of the committee for the invitation to address them on the topic of banking issues. Hopefully, everyone can hear me loud and clear. I am pleased to be joined today by my colleague, Mr. Gavin Kelly, CEO of our retail Ireland business. I very much hope we can be of assistance to the committee today. I am conscious that we bring a particular perspective to today's session being the only majority privately owned Irish retail bank. We circulated a longer opening statement in advance. I will, therefore, address the key points in that statement in my opening comments.

Tomorrow marks the one-year anniversary of the introduction of broad restrictions on the Irish economy arising from Covid-19. As a leading lender to the Irish economy, we felt a strong sense of duty to respond quickly to support our customers and the wider economy.

At the outset of the pandemic, we moved at speed to proactively introduce a range of supports for our customers. For example, Bank of Ireland put in place more than 100,000 payment breaks across the group, and of these, 97% of customers have returned to pre-Covid-19 terms with only a small number requiring further support.

Like any business, Covid-19 has presented challenges for Bank of Ireland. I want to take a moment to outline our 2020 financial results. We believe this context is very relevant to our discussion today. Ensuring our business model is appropriately profitable and sustainable is absolutely critical if we are to attract and retain investors, generate capital that can be lent into the Irish economy and reinvest in the business to ensure our long-term competitiveness and viability.

Bank of Ireland is unique among Irish banks in being the only institution to have fully repaid the Irish taxpayer, which we did in 2013. This support from the taxpayer was vitally important during the financial crisis and was gratefully received. It should never have been needed, however. That is why Bank of Ireland made it an absolute priority to repay the Irish taxpayer as quickly as possible. To date, Bank of Ireland has returned €6 billion to the State, delivering a €1.2 billion net cash return to taxpayers. Over the past three years, €40 million in dividends have also been paid by Bank of Ireland to the State.

The State’s continued 14% shareholding in the group, which is held at the discretion of the shareholder, as is the case with any investor, will represent an additional return to the Irish taxpayer whenever it is sold. The same is true for any future dividends paid out to shareholders. I mention this by way of illustration of the unique nature of our position in the Irish retail banking market.

In terms of our most recent financial results, 2020 was a challenging year, with Bank of Ireland announcing a €374 million underlying loss before tax. The bank, however, saw a stronger performance in the second half of the year and a return to profitability.

When we presented our annual results on 1 March, we also announced a range of significant changes to our branch network and to the provision of local banking services to our customers. In addition to the reduction in our branch network, we announced a new partnership with An Post to be launched in the coming months and in advance of any branch closures. This will enable all our customers to access banking services at more than 900 post office locations across Ireland in addition to our branch network.

This is the first significant change to the bank’s physical footprint in almost a decade whereas other banks have significantly reduced the size of their branch network in the preceding years. This change reflects the reality that we have reached an inescapable tipping point in customer preference between online and offline banking. We are, however, fully aware that changes like this can be of concern to some customers, especially those living or working in rural communities. Bank of Ireland will, therefore, continue to invest in a strong nationwide presence of 169 branches and, of course, we will also continue to offer mobile and telephone banking for all our customers.

Many changes are confronting the banking industry. As a country, we all need a profitable and sustainable banking sector to support ongoing growth and lending, especially as the economy recovers post Covid. A once in a lifetime process of change is under way in banking right now, not just in Ireland but across Europe, and indeed, the global banking sector.

The decision of NatWest to withdraw from the Irish market reflects the realities of a challenged sector and has thrust the dynamics of Ireland’s banking sector further into the spotlight. Our belief is that the continued attraction of private capital into the sector and the economy is the critical path to ensuring a sustainable, robust and more normalised retail banking sector.

In closing, the history of Irish banking, and the role banks had in Ireland's financial crisis of the past, is understood. The economic impact of the pandemic today on Irish businesses and households is recognised. We have been proactive in our support for customers during Covid-19. The focus of my team and me, however, is equally on the future of Ireland's economy, banking sector and the role Bank of Ireland can play over the next decade in Ireland's development. We are looking at am imminent period of recovery and growth. To enable the financial well-being of Irish households and businesses, an improved relationship between our sector and the State is overdue. As a leading lender to the Irish economy, Bank of Ireland wants to play a central role in this discussion about our collective future. I will be happy to now respond to any of the committee's comments or questions.