Business Irish

Saturday 21 October 2017

Ulster Bank loses €1.2bn as one-fifth of mortgages in arrears

Strategic review decides not to merge operations with North

Ulster Bank chief executive Jim Brown: ‘€100m for IT compensation and costs’
Ulster Bank chief executive Jim Brown: ‘€100m for IT compensation and costs’
Donal O'Donovan

Donal O'Donovan

ULSTER Bank, reeling from a €1.2bn loss, has ditched a scheme that would have seen the bank regulated by authorities in the UK instead of here.

It ends speculation the Central Bank could lose oversight of the county's third largest bank.

A strategic review by the bank did look at merging Ulster Bank's operation in the Republic and in the North into a single entity.

That entity could have been regulated by the UK's financial services authority, Ulster Bank chief executive Jim Brown told the Irish Independent.

However, it is not going to happen after a decision was taken to keep the bank's current structure intact, he said.

Central Bank

It means the Central Bank here will continue to regulate Ulster Bank in the Republic while UK regulators oversee operations in the North.

The news comes as the bank said losses increased to more than £1.04bn (€1.2bn) last year, as the bank struggles with bad debts and tighter margins.

Ulster Bank is owned by nationalised UK bank RBS. The loss of £1.04bn last year is up from £984m in 2011 for the Irish business. RBS reported a loss for 2012 of £5.2bn yesterday.

It means one in five pounds lost by the UK-taxpayer-owned bank was lost here.

The hapless lender is back in the spotlight this week for under-charging some mortgage customers and then billing homeowners for the lost money.

Around 1,300 customers with First Active home loans are affected by the latest glitch. They were not charged the full amount on their mortgage over a number of years because the bank failed to switch them from interest-only to full repayment mortgages.

This follows last summer's technical glitch that saw Ulster Bank customers unable to access their bank accounts, in some cases for more than a month.

Yesterday, the bank said the IT crisis cost the bank €100m in compensation for customers, staff overtime and other costs.

Few customers left the bank after the IT meltdown, Mr Brown said. In fact customer deposits increased by 7pc in the last three months of 2012.

Net interest margin – the difference between what a bank pays for deposits and what borrowers pay in interest – increased to 1.88pc at the end of the year.

Excluding losses on older loans, the bank made a small profit last year, though lower than in 2011.

However, old loans remain a big issue. At 18pc, almost one in five Ulster Bank mortgages, including the old First Active brand, are more than three months behind on repayments.

Losses continue to rise on commercial property and business loans. Some losses are being recouped. The bank was behind the sale of 2,000 properties in Ireland, according to Mr Brown.

It ranged from selling off repossessed apartments to the sale of the huge Dublin offices of State Street bank. Those sales as well as repayment of some loans helped cut the banks bad loans by over €1bn.

The bank has no plans to start selling off portfolios of its remaining commercial property loans, worth about €5bn.

Irish Independent

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