Wednesday 18 September 2019

Ulster Bank faces €38.5m conduct bill as tracker costs mount

Ulster Bank's headquarters in Dublin
Ulster Bank's headquarters in Dublin
Donal O'Donovan

Donal O'Donovan

Ulster Bank set aside £34m (€38.5m) for litigation and conduct costs in the first nine months of the year, according to financial results from parent Royal Bank of Scotland (RBS).

The Irish bank made a provision of €206m last year to cover the costs of a mortgage redress scheme for customers who were wrongly denied a cheap tracker rate.

Not all of this year's £34m is linked to trackers but the new tally includes £1m of costs accrued in the three months to the end of September, suggesting the cost of the scandal continues mount.

Earlier this week Ulster Bank said that it had returned all of the 3,500 customers affected by the tracker issue to their correct interest rate, and had paid compensation to 100 wronged borrowers. Redress for other customers will be completed by the end of June next year, the bank said.

The Irish bank yesterday reported an underlying profit of €47m for the first nine months of the year, down from €81m in the same period last year.

Net interest margin (NIM), the difference between what Ulster pays for money and what it charges for loans, was 1.64pc for the first nine months of the year. That remains well below the rate at RBS.

Meanwhile, RBS itself raised income and cut costs in the third quarter to deliver a forecast-beating operating profit which lifted shares in the UK state-owned bank yesterday.

RBS said operating profit was £871m in the quarter, beating analysts' expectations as it grew income by 6pc from the same period a year ago.

Saved by a £45.5bn UK government bailout during the 2008 financial crisis, a third of which flowed to Ulster Bank, RBS reported its third consecutive quarter of profitability as it emerges from restructuring but still forecasts an overall loss this year.

Analysts have said an expected settlement with the US Department of Justice over its alleged mis-selling of mortgage-backed securities during the financial crisis could be as much as £12bn, and RBS has already set aside more than half of that figure as a provision for it.

CEO Ross McEwan told reporters that while there had been no "substantial discussions" with or opening offer from the Department of Justice, the bank remained hopeful it would reach a settlement this year. (Additional reporting Reuters)

Irish Independent

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