'If you start saying I want the £15bn back you'd do some strange things'
Post-crash, Ulster Bank was the problem child for its RBS parent. Now back in profit, it's a 'core' franchise, but its £15bn rescue will take decades to recover. Donal O'Donovan meets the RBS chief
Three year ago Ross McEwan set a Kiwi cat among Irish pigeons when, as newly installed chief executive of RBS, he ordered a review into the future of Ulster Bank. A "review" is often code for hanging out a For Sale sign, but it didn't happen. RBS opted to stick with Ulster Bank - though only after splitting its operations in the Republic from the business in Northern Ireland.
Three years, and one Brexit vote, later McEwan says things worked out well.
"Ulster Bank is part of the bank. It's not for sale. We've got a business here in the Republic that strategically it was a good call to hold on to," he says.
"The economy here is good, it's growing about 4pc of GDP - that's twice the American market, that's two and a half times the UK market, it's not all too bad."
Ulster also has one of three EU banking licences RBS will still hold regardless of the post-Brexit banking landscape, which may yet prove useful, he points out.
The low-key New Zealander towers over me as we meet in Ulster Bank's Dublin headquarters. The 59-year-old relaxes into a chair kicked back from the bank's board table.
He's on a tight schedule. Earlier in the day he addressed a banking conference in London, then spent the afternoon meeting senior Ulster Bank managers in Dublin. After our half-hour slot he was off to Government Buildings to meet Enda Kenny.
The Ulster Bank he inherited was once described by RBS' own chairman as its biggest headache.
After the crash Ulster Bank needed, and got, a £15bn bailout from its UK parent.
Can taxpayers in Britain, who own RBS, expect that money back, I ask? It seems not.
"I think it'd take decades to get that amount of money out of a business this size and I think we should just move on and try to create a really good bank out of it so that it does create value long term for shareholders. That's our objective," Mr McEwan says matter of factly.
"If you start saying I want the £15bn back I think you'd do some strange things with the bank. If you develop it for the long term based on a very good strategy then you know we'll get it recovered but over a very long period of time."
It probably helps that Mr McEwan wasn't around when Ulster Bank was ramping up lending, or needed bailing out. He joined RBS in 2012, after a career as a senior manager in insurance and banking in his native country and Australia.
He replaced Stephen Hester in the top job a year later.
RBS remains a banking giant but Mr McEwan is happy to have seen it's ambitions shrink to focus on the UK and Ireland. "We were so big. When you think about what we were we were a global business in 50 countries and Ireland was just another one of those."
The strategy now is built around a core banking operation in the UK and Ireland, he says. "Everything else has to actually add to or help those businesses, so we have a US business because it supports the businesses in the UK and the Republic of Ireland and the financial operations we deal with, and the same with our Asian operations.
"We're here creating a good bank. It's strategically positioned very well now because we are the only bank in the Republic of Ireland that has operations in Northern Ireland, England, Scotland, Wales and western Europe that are connected for Irish businesses.
"I met an Irish business actually in Wales at the beginning of last week who said, 'we've just bought a business in Wales, we've got a business in England and we bank with you there but we don't bank with you in Ulster Bank but we want to talk to you because we want these businesses connected'."
Mr McEwan's definition of a good bank is interesting. He's intensely focused on net promoter scores - a measure of customer endorsement.
"We've based the entire bank ambition on getting to number one in customer trust and service and advocacy by the time we get to 2020."
"We have some things to solve for Ulster Bank across the bank, to make it a really good bank, he says. "We want to make sure that it does focus very strongly on customer needs and we're still seeing negative scores, like net promoter scores across this whole industry that are negative, we are probably the best of a group that needs to be a lot better. So we are getting there."
As number three in what's often seen as a two-horse race between AIB and Bank of Ireland, does the Irish business have the scale to stay the course?
Down the line M&A is an option, but in the meantime Ulster can look to the UK, he says. "We have the scale at home, we have the advantage of being able to use that scale for Ireland. I would like to grow the business here but I'm not going to grow it at all costs."
"We have a much bigger operation at all levels in the UK and Gerry (Mallon, Ulster Bank ceo) and the team here are free to use those resources, not double up on those resources, so for example a lot of work that we've done on the mortgage area Gerry and the team have been free to pick up all of the attributes from our business in the UK which has been growing very strongly in mortgages and take all of that expertise here."
Ulster Bank's also benefited from the roll-out of a slick, thumb print activated, mobile banking app, the costs of which were absorbed across a much bigger group, he points out.
Ulster Bank is trying out technology that may now be picked up by the wider group, he says.
The news is not all cheery. As well as targeting growth, Mr McEwan sees room to cut. He's also unapologetic about the controversial selling off of problem customer loans.
"Today I think our cost structure here is too high I've just been talking to the staff our cost structure across the entire bank is too high and it's our job to get that back into a shape where we are getting a much better return back to our shareholder and a better return of products to our customers."
Having shrunk the balance sheet since the boom, including by selling off big chunks of property loans, Ulster is now a "smaller business with a bigger infrastructure." That suggests no let-up in the trend of Ulster Bank, like its rivals, cutting jobs and branches.
However, he still sees a role for branches, if not the traditional one. "I know it's a highly emotional topic for people around branches and closing branches but where those assets are not used we have to change the configuration, to be more service and advice centres," he says.
Things are even less comfortable for a cohort of Ulster Bank customers whose loans are currently on the market being sold by the bank.
In May the bank bundled up €2.5bn of distressed business loans, buy-to-let mortgages and around 900 owner occupier mortgages and put them on the market.
The loans are all in long term arrears and so-called vulture funds are the only likely buyers.
Mr McEwan is adamant the sale is justified. "Where people have a non-performing loan I think a bank has the right to actually take some action to get that money back in one way or another," he says.
The alternative is for compliant customer to prop up those in arrears, he says.
For the bank, the big push is to clear the decks and release capital to support growth, he says.
"It's a case of moving away from all the distractions that this bank has had and putting that capital back to work in places like Ireland that will be good for the economy and good for us." Across the wider RBS group the share of non-performing loans has fallen from 9.6pc to about 3pc since Mr McEwan took over. In Ireland the average across all banks is still above 15pc.
On the great issue of the day, Brexit, Mr McEwan says it's too early to say. If British banks are eventually locked out of the Single Market the Irish licence could become a useful tool, but everything for now is speculation.
"The strategy is play to our strengths, so we'll look at opportunities as well as the threats." In the meantime, along with all banks, it's a question of planning on the 'what ifs'.
"We don't know what they are at the moment so you have to do the full spectrum so that you are ready to continue to do business on behalf of your customers."