The Post Office is to start offering its 29 million customers everything from personal loans and credit cards to savings accounts and mortgages as part of a huge expansion into financial services in partnership with the Bank of Ireland.
The rollout of the new services through the Post Office's 16,900 branches will begin next week with a pilot trial in the Midlands and is designed to transform the organisation into a major player in the banking market.
Bank of Ireland, which made an unsuccessful €16bn (£11bn) bid for Abbey National last year, is to invest £125m in the 50:50 venture, which the two companies believe could be generating between £250m and £500m in profits within five years. The Post Office and BoI will have a seat on each other's board.
David Mills, the chief executive of the Post Office, said: "If we got 1 per cent of the financial services market we would be happy bunnies. If we could get 5 per cent, we would be delirious."
All of the new financial services will be supplied by BoI although they will be branded as Post Office products. The first product to be launched will be personal loans, followed by credit cards early next year. The last product is likely to be home mortgages because in order to sell them, subpostmasters would need to be trained in accordance with rules laid down by the Financial Services Authority.
Mr Mills said the new joint venture with Bank of Ireland would not affect its existing relationships with other High Street banks such as Barclays, Lloyds TSB and Alliance and Leicester, which allow their customers to write personal cheques and use debit cards in Post Office branches. The Post Office and BoI already have a joint venture selling foreign exchange, which has captured 18 per cent of the retail market from a standing start in March last year and generated £35m in pre-tax profits.
BoI's move to team up with the Post Office follows a recent decision by the Irish bank to cull its own UK network, resulting in the closure of about 36 branches and the loss of 500-600 jobs. Some 30 per cent of BoI's business is already in the UK. The Post Office's branch network is bigger than all of the UK's banks and building societies put together and handles some £140bn of cash transactions a year.
Apart from the failed approach to Abbey it has also contemplated buying Alliance & Leicester. Sources at the Irish bank said the decision to team up with the Post Office was a much cheaper way of extending its UK presence.Reuse content