Record £1bn in 'non-core' loan losses at Ulster Bank
Published 06/08/2011 | 05:00
QUARTERLY loan losses at Ulster Bank's 'non-core' division hit a new record of almost £1bn (€1.14bn) in the three months to June, over-shadowing a slight fall in quarterly loan losses in the mainstream Ulster operation.
The non-core figure was almost 40pc higher than the hit taken a year ago, after commercial property development loans advanced by Ulster in the boom booked £810m of losses.
Royal Bank of Scotland (RBS) chief executive Stephen Hester also cautioned that he won't "be doing any victory marches" about the improvement in Ulster's core business in case the latest eurozone crisis destabilises things again.
Yesterday's figures mark the latest in a long line of losses for Ulster, whose lending to big-time developers contributed to losses of close to €10bn from boom-to-bust.
The new data shows commercial property investment was the second biggest drag on Ulster's non-core portfolio in the three months to June, contributing £161m of losses.
"Other corporate" and foreign lending made up the balance, pushing total non-core losses to £982m for the period. The figures mean Ulster's loans accounted for 70pc of non-core losses across the massive RBS group.
RBS finance boss Bruce van Saun told analysts there was a "bit of a one-time major entry" in Ulster's latest losses because the bank had carried out a "very detailed analysis" of land values.
"Given the significance of the non-performing loans in Ireland, we will, on a regular basis, be reviewing this with intensity," he added.
"I'm not going to say there won't be more adjustments down the road, but I think we're pretty much now on the front foot ... on the development book side at this point."
The Ulster 'core' result showed impairments dipped from £281m in the second quarter of 2010 to £269m in the same period this year, and Mr Hester said recent economic data made him "hopeful" that the corner had been turned.
"We hope that what's going on in markets around us doesn't set that back so we're not doing any victory marches at this juncture, but there are some hopeful signs there," he added.
Despite the lower impairments, Ulster's operating losses actually worsened in the quarter, coming in at £189m against £177m a year earlier, as a £25m fall in Ulster's income cancelled out falling expenses.
Ulster attributed much of its revenue fall to a 14pc dip in net interest income, "reflecting higher funding costs" which had only been "partly offset" by loan re-pricing.
Yesterday's data also shows that Ulster's deposits grew marginally between the end March and end of June, coming in up €500m at €24.3bn; the bank said core "franchise deposits" had seen "strong growth" which offset lower wholesale balances.