UK Post Office and bank of Ireland announce joint venture
Post Office Ltd and Bank of Ireland Group have announced that they have agreed the key commercial terms for a financial services joint venture. The new company will launch Post Office branded financial services products early in the New Year through the Post Office branch network, via the telephone and website.
The product range will include personal loans, savings accounts, credit cards, personal insurance and mortgages.
Post Office Ltd carried out extensive market research over the past 18 months among 20,000 customers. The research clearly indicated a market for financial services products offering a combination of trust, simplicity, reliability, convenience and security – characteristics all associated with the Post Office Ltd brand.
Post Office Ltd is part of the Royal Mail Group and has one of Europe’s largest retail networks with more than 16,900 branches. It already operates a joint venture with Bank of Ireland in foreign exchange – First Rate Travel Services. This was established in March 2002 and is the UK’s second largest foreign exchange provider to retail customers.
The joint venture will be owned equally by Post Office Ltd and Bank of Ireland Group and has an initial term of ten years. Each shareholder will be offered board representation on the other’s board of directors, subject to the relevant corporate governance procedures.
Bank of Ireland Group will invest £125 million, funded from Group internal resources, to enable the establishment of the joint venture and provide the core infrastructure and start up costs. The Group will provide or source the product range, which will be distributed through the Post Office network.
David Mills, Chief Executive, Post Office Ltd, said:
“There was intense competition to partner Post Office Ltd in this significant expansion of our service. We selected Bank of Ireland because of its ability to deliver products that will appeal to our customers and because of our existing highly successful relationship.
“Post Office Ltd’s retail network is larger than all the UK banks and building societies put together. Our branches serve approximately 29 million people who make some 42 million visits to our branches each week; 27 pence in every £1 in circulation passes through a Post Office branch. This extensive network and customer base, coupled with Bank of Ireland’s expertise in the development and delivery of financial services products, creates a business with very exciting potential.
“Customers know that the Post Office and its people provide them with reliable service and they trust us. Our new range of products will have great appeal and I expect Post Office Ltd to become a major provider of personal finance services. This is great news for our customers, as our employees and subpostmasters throughout the United Kingdom will be able to offer a much enhanced range of products.”
Mike Soden, Group Chief Executive, Bank of Ireland, said:
“This is an excellent opportunity for Bank of Ireland to extend its reach in the UK – a market that is central to our strategy. This joint venture, combined with our existing personal and business banking operations in the UK, gives Bank of Ireland a unique level of access to the UK retail financial services market.
“We have developed a very good working relationship with Post Office Ltd and its people and a detailed understanding of the dynamics of its distribution model, as a result of our collaboration in the foreign exchange business. First Rate Travel Services generated pre-tax profits of £35 million last year and underscores the potential of this new venture. I am delighted that we are to be a part of it.
“It’s the beginning of a new chapter for Bank of Ireland in the UK market.”
The agreement is subject to binding contracts being entered into and appropriate regulatory approvals being obtained.
