Monday 23 October 2017

Loan writedowns push Ulster Bank to £314m loss

Laura Noonan

Laura Noonan

LOAN impairments at Ulster Bank more than trebled to £499m (€599m) in the first half of the year but chief executive Cormac McCarthy yesterday said it was still too early to "call the bottom" of the market.

The massive hit -- largely related to property lending -- pushed Ulster to a loss of £314m (€377m) for the half-year, starkly worse than the £8m lost during the same period in 2009.

Asked if the worst was over, Mr McCarthy said it was "still a very uncertain time".

"There's a lot out there that has still has to be resolved," he added. "I wouldn't call the bottom yet."

Ulster's bruising losses were announced on the same day as parent RBS -- the subject of the world's biggest bank bailout -- announced a return to profitability. The UK banking giant made group-wide net profits of £9m for the six months to June against losses of £1bn in the first half of 2009. Ulster was the only RBS division to record higher impairments for the period.

"Ireland had the biggest economic fall in the developed world and we also had the property bubble, so we're still working through that," Mr McCarthy said.

The impact of the property bubble weighs heavily on Ulster's results. The £499m in impairments includes £199m in corporate property loans and another £209m in "other" corporate loans.

Analysts suggested Ulster could be marking down the loans in line with the average 47pc haircuts applied by the National Asset Management Agency when it assumed similar loans from domestic banks.

"The main hit has been on property and development land," Mr McCarthy said. "There's been some impairment in retail, hotels, leisure, but a lot of that is linked to property as well."

Ulster backed some of the biggest property deals of the boom, including Sean Dunne's €380m Ballsbridge spree and Arnotts' massive property play.


Mr McCarthy's bank, along with other lenders, took control of Mr Dunne's d4 hotels in the spring. Ulster is also in the process of taking control of Arnotts with Anglo Irish Bank.

Both plays are being handled by the bank's Global Recovery Group, which Mr McCarthy said had "staffed up considerably" in the last 18 months. "It's very important for us to secure viable businesses and make sure they remain viable," Mr McCarthy said. "We're not going to dump property and assets -- we're in it for the long-term."

The latest round of Ulster impairments came even though the bank has already siphoned off its £15bn of "bad" loans to a special unit in the RBS group.

Beyond impairment charges, yesterday's results showed a 24pc improvement in Ulster's operating profits, which came in at £185m. "The work we've done over the last 18 months is coming through in terms of stable income and costs," Mr McCarthy said.

Ulster's net interest income shrank marginally from £410m to £382m, while total income was down 6pc to £488m. Costs were down by almost 18pc.

Mr McCarthy said Ulster had held market share in most markets with the exception of mortgages, where he said compet- itors were doing business at "uneconomic rates". "That's starting to change now," he said, adding that Ulster was keen to grow its mortgage book.

The bank executive, who announced plans to step down a few weeks ago, insisted that RBS's commitment to the Irish market remained "absolute" despite the latest losses.

Irish Independent

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