Tuesday 16 January 2018

New boss says Ulster Bank now a strategic asset for UK parent

Gerry Mallon refuses to rule out merger with a rival bank
Gerry Mallon refuses to rule out merger with a rival bank
Donal O'Donovan

Donal O'Donovan

The new head of Ulster Bank has refused to rule out a merger deal with KBC or Permanent Tsb, but said his main focus is growing the country's third biggest lender organically.

Newly-appointed Ulster Bank Ireland chief executive Gerry Mallon said the Irish unit of Royal Bank of Scotland has become a more strategic asset for its UK parent, Royal Bank of Scotland (RBS), as a result of the Brexit vote in June.

Asked whether Ulster Bank was in talks to combine with any other lenders to challenge market heavyweights AIB and Bank of Ireland he refused to rule out a potential tie-up.

"I am interested in any opportunity that makes strategic or commercial sense," he told the Irish Independent.

However, he said his focus was on organic plans to grow the Irish business.

He was speaking after the bank published a €155m profit for the first half of the year, down more than a fifth from the same time last year.

Expenses soared this year, including €118m that has been set aside in the period to cover the costs of compensating customers who unfairly lost cheap tracker mortgages deals.

In better news for Ulster Bank, its mortgage drawdowns soared by 47pc as the bank increased its market share here to 18pc in a period when lenders generally are struggling to grow.

Mr Mallon, who took the reins at the bank nine weeks ago, said mortgage growth was driven by new borrowers, not customers switching lender.

He credited front line staff and improved sales processes for the recent lending growth.

"Improvements to customer experience such as mobile mortgage managers and process improvements as well as the introduction of a number of new competitive rates," he said.

Business lending in Ireland was flat in the first half of the year, but with a pick up in momentum in the second half of the period, he said.

The RBS-owned bank posted total income during the period of €377m, up from €368m. Meanwhile operating expenses increased to €402m, including provisions.

In a reversal of the period after the crash, when Ulster Bank was heavily loss making and seen as a weak link in the wider RBS group, the Irish unit is now a more valuable asset to the group - including because its Irish bank licence is a passport into the entire EU. "Our euro profits are worth more to RBS in sterling terms, while RBS owning a bank in the EU is strategic," he said.

RBS itself yesterday reported a £2.04bn loss for the first half of the year, and its core UK market is facing into a potentially imminent recession.

In the Republic of Ireland Ulster Bank's status as the third lender in a market often described as duopolistic has led to widespread speculation a merger with one or more other banks could be needed to challenge AIB and Bank of Ireland.

Gerry Mallon said being percieved as the third biggest bank in the Irish market means that in the past Ulster has under-leveraged its status as the biggest bank across the UK and Ireland.

In his new role, he said, he aims to bring more of RBS' capabilities into the Irish market.

Meanwhile in the UK, RBS effectively ended efforts to float its Williams & Glyn business on the stock exchange citing complexity and the lower interest rate environment. That business is headed by former Ulster Bank chief Jim Brown.

The decision to stall a flotation may bear out reports a sale of the unit to Santander is on the cards.

Irish Independent

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