Ulster Bank posts first profit in five years
Ulster Bank made a profit for the first time in five years in the first quarter and said it would have been higher if the Government had not slapped banks with a one-off levy.
The 188-year-old bank swung to an operating profit of €17m from a €1bn loss in the fourth quarter after loan losses fell by 80pc to €57m in the first quarter after the bank transfer of risky assets to an internal bad bank.
The news will be welcome to parent Royal Bank of Scotland, which has pumped €15bn into Ulster Bank and is casting around for investors in the Irish lender ahead of a planned share sale in a few years time.
Chief executive Jim Brown said his bank was now focused on sustaining recovery in its core business.
New RBS chief executive Ross McEwan said yesterday that he will update investors on his plans for Ulster Bank later this summer.
Analysts were broadly supportive. "Returning to profitability in the first quarter represents a milestone for Ulster Bank," said Goodbody Stockbrokers analyst Eamonn Hughes. "Whilst RBS indicates that Ulster is committed to Ireland, we await further details on its plans to be a challenger bank in a marketplace likely to be dominated by itself and the two main Irish banks."
Ulster Bank said its net interest margin increased by 26 basis points to 2.36pc following the transfer of non-performing assets to its external bad bank along with a continued improvement in deposit margins. It also posted a fall in the number of mortgage customers more than 90 days in arrears in each of the last 12 months.
Shares in parent group RBS soared 12pc yesterday after it said it had trebled its profit in the first quarter, beating analysts' expectations and handing a boost to Mr McEwan as he looks to turn around the British government-controlled bank's fortunes.
The bank reported a net profit of £1.2bn (€1.46bn), up from £400m the year before, benefiting from improved cost controls and a reduction in losses from bad loans.
The performance marked only the sixth occasion RBS has reported a quarterly profit since Britain pumped £45bn into the bank during the 2008 financial crisis, leaving it with an 81pc shareholding, and contrasted with an £8.7bn full-year loss in 2013.
The bank said it was overhauling its computer systems for NatWest and Ulster Bank as part of a wider £750m three-year programme to improve "safety, security and resilience". This follows a series of IT failures across the group. A major technical glitch in 2012 significantly hampered Ulster Bank's ability to process electronic payments, affecting the accounts of some 100,000 clients in the Republic for several weeks.
The results, which came a day after fellow bailed-out bank Lloyds also reported improved earnings, reflect the impact of RBS's decision last November to create an internal "bad bank", designed to fence off its riskiest assets and leaving the rest of the bank in a better position to lend.
The results also include no new charges for past misconduct, such as the mis-sale of loan insurance in Britain and possible mis-selling of US mortgages. RBS said in January it would take a £3bn charge in its 2013 results to cover the cost of these misdeeds, resulting in its top executives not receiving any bonuses for the past year.