International exit provides expansion opportunity for Irish banks

Bank of Scotland (Ireland) is expected to unveil plans to cut its Irish presence on Friday, which will make it the latest in a series of international firms to scale back their local operations. However, this could present an expansion opportunity for big domestic players. Whether this means they'll start hiring any time soon is a different matter.

It's anticipated that Bank of Scotland (Ireland) will become the latest victim of parent company Lloyds TSB's cost-cutting drive, when it gathers for its quarterly meeting on Friday, according to the Irish Times. Significant changes to its retail banking operations are on the cards.

This would be the latest in a series of redundancy announcements by international banks, after Ulster Bank unveiled plans for 750 job cuts through its merger with First Active in January and ACC Bank chopped 200 staff last month in a bid to cut costs by 30%.

The potential upside to this, though, is that Irish banks could gain a bigger piece of the retail pie.

Ciaran Callaghan, an analyst at NCB Stockbrokers, says: "Further retrenchment by foreign banks is likely as deleveraging and capital preservation become the key focus. This gives the Irish banks the opportunity to significantly increase their domestic market share once they have comfort over capital levels."

However, these benefits are unlikely to be felt any time soon. In fact it's only by virtue of government intervention that they've held off making redundancies themselves.

Brian Lucey, finance professor at Trinity College, believes Irish banks are likely to make cuts before the hiring freezes are lifted.

"The government stake-holding means the banks are under political pressure not throw domestic bankers on the street," he says. "Their profits have collapsed, but their cost-base hasn't really reduced. I can't see how this is sustainable in the long-term without some change of structure and this has got to involve a long, hard look at headcount."