AIB could cut staff next year

AIB's new managing director Colm Doherty has admitted something to staff that ongoing chief executive Eugene Sheehy did not - job cuts may be necessary.

Despite the bank's iron grip on costs, which has included cancelling the Christmas party

and cutting down on stationery, it has yet to unveil any redundancy plans.

In the immediate aftermath of state bailouts, it was considered too politically sensitive for both AIB and Bank of Ireland to drastically cut headcount, despite the financial argument for doing so.

But in a letter to staff yesterday, Doherty outlined his "1,000 day plan" to re-build the bank, during which "tough decisions are needed".

"I am particularly conscious that people are concerned about their careers and job security. However, our current costs are too high for the level of revenue we expect to generate. We have already reduced our workforce by 1,500 this year through natural attrition, and tough decisions are needed to further reduce our costs," he wrote.

He also said that staff would receive no pay rises in 2010 and that AIB would "consider all other options to further reduce our costs".

The six main priorities of Doherty's plan are:

1. Appointing a new management team.

2. Delivering NAMA.

3. Re-organising our credit and risk functions.

4. Delivering the EU restructuring plan.

5. Developing capital initiatives.

6. Improving our focus on the day-to-day delivery of customer service.

The news is comes the day after Irish Life & Permanent announced that it was seeking 120 redundancies, through the closure of 11 Permanent TSB branches.

"It's clear that the short-term outlook for new business levels hasn't improved and this is the next step in getting the bank fit for the new business environment we face," said Permanent TSB Chief Executive Officer David Guinane.