Business Irish

Sunday 22 July 2018

Loss-making Ulster Bank gets £3bn boost from parent

Joe Brennan

Ulster Bank, which reported a £368m (€414m) annual loss yesterday, received a series of capital injections from its UK parent last year to reinforce its reserves as bad loan losses spiralled.

Cormac McCarthy, chief executive of the all-island lender, told the Irish Independent that the bank received a £500m from Royal Bank of Scotland (RBS) in late December.

"There's a lot of talk about a 'third force' in Irish banking. We are already there -- with a history of 174 years," Mr McCarthy said.

"We have very strong support from RBS and will remain very much core to its business."


In line with a restructuring of the broader RBS group, Ulster's loan book was split in the middle of last year between a core and non-core bank, which effectively is an internal 'bad bank'.

Over time, it plans to sell, restructure or write off loans quarantined in this unit.

Bad loan losses in the core business jumped more than six-fold last year to £649m, pushing the bank into an operating loss of £368m. The entire portfolio of the main bank stood at £39.5bn at end of the year.

But writedowns in the non-core business, understood to include loans to top developers such as Sean Dunne, soared 230pc to £1.38bn.

Ulster, Dutch lender Rabobank and fallen Icelandic bank Kaupthing recently took a significant equity stake in Mr Dunne's prime Ballsbridge hotel sites, which he acquired for €379m in 2005.

Mr McCarthy confirmed the bank was doing some debt-for-equity swaps. "Our philosophy is that property is a long-term gain and we may have to wait 10 years on projects. In taking equity stakes, we'll benefit on the upside in the end," he said.

While observers noted some signs of stability in impairments in the non-property portion of Ulster's loan book, Mr McCarthy said: "It is really going to be middle of 2010 before we have any ability to make a call on whether this is a strong trend."

The broader RBS group, which is 84pc-owned by the UK government, posted a £3.6bn loss for the year. Earlier this week, chief executive Stephen Hester waved his bonus for 2009 in an effort to take the heat out of the contentious issue, but state-owned RBS has paid more than 100 bankers at least £1m each in bonuses.

Irish Independent

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