Business Irish

Friday 22 November 2019

Ulster Bank to speed up sale of its remaining toxic loans

Ulster Bank HQ in Dubin.
Ulster Bank HQ in Dubin.

Peter Flanagan and Colm Kelpie

Ulster Bank is believed to be speeding up the sale of the lender's remaining Irish loans as the UK parent decides to cut its losses and wind up its toxic loans unit early.

Royal Bank of Scotland is said to be planning to off-load most of the toxic assets in its bad bank by the end of this year - 12 months earlier than planned.

Ulster Bank has already sold off most of its bad property- related loans made during the Celtic Tiger era, but at least some of the assets yet to be sold by RBS will be tied to Ireland.

A spokeswoman for Ulster Bank, however, declined to comment.

Ulster took a write-down of more than 75pc when it sold off its Project Aran portfolio of loans tied mostly to Irish assets just before Christmas. The bank also dispensed with a €1.2bn portfolio known as Project Achill last year.

There is still more to come, however. In its last quarterly results, RBS said that there were assets worth a nominal £2.9bn (€3.9bn) still on the balance sheet of RCR Ireland - the group's internal bad bank.

The vast majority of those assets will be sold off at a loss.

Unlike other Irish banks, Ulster is owned by the UK's RBS, so none of its loans have been transferred to Nama.

However, RBS had to be bailed out by the UK government in 2008, putting taxpayers there on the hook for Ulster Bank's losses.

Ulster Bank has cost Britain an estimated €16bn in bailout funds so far.

UK Chancellor George Osborne had considered selling or closing Ulster Bank before deciding to retain the business.

Just before Christmas it was revealed that both Ulster and RBS had taken a hit of more than €4.5bn after a huge property portfolio known as Project Aran was sold to US investor Cerberus Capital Management for €1.4bn - the biggest deal the bank had done.

That was about 76pc below the par value of the loans, which were originally worth as much as €6bn.

The disposal of RBS's bad bank assets this year will depend on market conditions and the continued strength of the British and Irish economies, a source told Bloomberg.

RBS created the bad bank - known as RBS Capital Resolution - last January to dispose of the majority of loans in the division by the end of 2016 and free up capital to meet new regulations.

However, assets in the unit declined 38pc to £17.9bn at the end of September, placing it on an "accelerated timetable," the bank said.

Ulster's Project Aran sale was the last collection of loans tied to Ulster Bank to have been sold off.

Project Achill involved commercial real estate mostly based in Ireland.

That portfolio had a par value of €1.2bn.

The RBS move to accelerate its sell-off follows as NAMA pursues a similar strategy.

The state bad bank has said it will sell off at least €250m worth of assets a quarter as it seeks to redeem 80pc of its NAMA bonds by the end of this year - far quicker than had been originally expected. (Additional reporting Bloomberg)

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