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Bank of Ireland is in talks to renegotiate its deal with the British Post Office, raising the prospect of higher costs for the state institution, reports The Times.

BoI, which offers products such as credit cards and mortgages through 11,000 Post Office branches and runs 2,500 free cash machines, is working with bankers at Perella Weinberg to extract better terms. The Post Office is already under financial strain: in May, the National Federation of SubPostmasters warned it was at a “tipping point”, with 2,500 branches at risk of closure.

BoI, led by former HSBC banker Francesca McDonagh, said its relationship with the Post Office was “successful” and due to run until 2023.

The tie-up is seen as crucial at a time when the big four banks — HSBC, Barclays, Royal Bank of Scotland and Lloyds — have been closing branches at a rapid rate.