Ulster Bank books €1.35bn of losses in first quarter
Published 07/05/2011 | 05:00
EMBATTLED Ulster Bank booked more than €1.35bn of loan losses in the first quarter of the year, bringing the bank's tally of boom-to-bust loan losses to more than €8bn.
The stark figures encompass Ulster's 'core' and 'non-core' operations and were revealed in interim results published by parent Royal Bank of Scotland (RBS) yesterday.
Ulster's performance was so bad that it dragged the overall RBS group to a £528m loss, with Ireland standing out as the only region not to show an improved performance in the three-month period.
RBS noted that it expected impairments across Ulster's business to "remain elevated" in the second quarter before "gradually declining in the second half".
Ulster's 'non-core' division, which includes assets "no longer core to the strategy of the group", booked the heftiest losses with impairments of £839m (€957) recorded.
The result was worse than the £789m hit in the quarter to December, and sharply worse than the £552m impairments in the first three months of 2010.
Strikingly, Ulster accounted for 80pc of RBS's non-core impairments, even though the Irish unit accounts for just 15pc of non-core loans.
Commercial development accounted for £503m of the non-core hit, followed by commercial investment's £223m and £113m for "other corporate" and "other EMEA (Europe, Middle East and Asia)".
In the 'core' Ulster division, operating losses for the first three months soared by almost 40pc year-on-year, to £377m.
The results were "overshadowed by the challenging economic climate in Ireland" and related impairments, which rose £85m to £461m, RBS said.
RBS blamed the higher loan losses on a "continued deterioration in mortgage credit metrics" coupled with a "higher level of defaults in the corporate investment and SME portfolio".
Some £223m of Ulster's core impairment charges were linked to mortgages, against £159m of mortgage-related loan losses in the quarter to December.
Corporate property loans accounted for another £97m in the latest batch of provisions, while "other corporate" loan losses came in at £120m and "other lending" took an £11m hit.
RBS stressed that it was "supporting" customers in difficulty, with 4,000 mortgage customers already taking advantage of a 'flex' system that helps them to find "practical solutions" to problems.
On the trading front, RBS crucial net interest margin contracted by 9pc in constant currency terms amid higher funding costs, while lending remained muted.
Despite the hefty losses and sparse demand for new lending, RBS has repeatedly insisted it is not planning to offload Ulster.
In yesterday's statement it said Ulster was "in position to capitalise on those growth opportunities that are starting to emerge in the significantly more consolidated Irish banking market".
RBS has also recently appointed a new chief executive to Ulster, following the departure of Cormac McCarthy.