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RBS expected to commit to Ulster Bank's Irish unit

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Expectations: Royal Bank of Scotland CEO Ross McEwan. Photographer: Simon Dawson/Bloomberg

Expectations: Royal Bank of Scotland CEO Ross McEwan. Photographer: Simon Dawson/Bloomberg

Expectations: Royal Bank of Scotland CEO Ross McEwan. Photographer: Simon Dawson/Bloomberg

THE UK's Royal Bank of Scotland is expected to outline its commitment to Ulster Bank this week when the former sets out its results.

It follows a year-long review when the bank and its advisors looked at options to cut RBS's stake in the Irish unit either through a part sale to outside investors or a merger with the likes of Permanent TSB or KBC.

Ulster Bank, headed up by Jim Brown, has dramatically revised the scale of expected loan losses this year, betting that the rising economy and recovering house prices will boost its financial position.

The improvement in the bank's finances reflects Ulster Bank's assessment of the value to its balance sheet of a bounce back in property values and a decline in the level of mortgage arrears.

Yesterday's news that it comfortably passed the European-wide stress tests will also be a boon for the lender, and will help copper fasten expectations that RBS will hold on to Ulster.

Ulster Bank returned to profit in the first half of this year, boosting its ability to begin returning some of the €16.8bn (€21bn) that the UK parent was forced to pump into the bank to cope with losses on boom-era lending.

Efforts by RBS to find outside investors to take over part of Ulster Bank appear to have been quietly dropped in recent months.

A spokeswoman for Ulster Bank declined to comment, amid a report in the 'Sunday Telegraph' that RBS will commit itself to its Irish wing.

Ulster will also outline its results on Friday. Earlier this month the head of RBS, Ross McEwan, said that it was his preference not to sell Ulster Bank.

It was his clearest language on the future of Ulster Bank since taking over as head of RBS last year.

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"My preference has been to hold onto that business (Ulster Bank), but we have got to find an answer for shareholders," Mr McEwan told investors on a conference call,

Even so, RBS pumped billions into Ulster Bank during the crisis and is under pressure to generate a return on that capital.

Ulster has returned to profit this year for the first time since the crash.

Yesterday, the bank received a boost after passing European stress tests.

Mr Brown said the outcome demonstrated the progress made over the last couple of years.

"This progress has continued through 2014 with our return to profitability and an acceleration of our disposal of legacy assets resulting in an expected Common Equity Tier 1 ratio of circa 17pc at 30th September 2014," he said.


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