Ulster Bank's parent NatWest Group is handing more than £1.1bn (€1.28bn) back to UK taxpayers just a month after announcing its Irish exit because of poor capital returns here.
NatWest, which is currently 62pc owned by the British government, announced yesterday that it was buying back more than £1.1bn of shares from the UK Treasury in an off-market deal to be settled on Tuesday.
The announcement followed a protracted six month strategic review of Ulster Bank that ultimately concluded on February 19 that the Irish lender was "not in a position to achieve an acceptable level of sustainable returns over its planning horizon".
NatWest CEO Alison Rose ordered a "phased withdrawal" from the Irish market, putting the fate of 2,800 jobs, dozens of branches and millions of customers into doubt.
A key concern for NatWest in the review was the €4.5bn of so-called "trapped capital" in Ulster Bank which was generating minimal returns for the UK parent, but could not otherwise be extracted due to tough capital requirements for Irish banks.
Ulster Bank's exit from the Irish market is expected to take up to two years, tying up the capital until the wind-down is complete.
But overall capital redeployment is in line with NatWest's strategy as articulated in a presentation to analysts on Thursday, in which the bank pledged to distribute £7.7bn-£9.4bn in capital to shareholders by 2023.
"Buying back stock at these multiples is good capital management and good ROE [return on equity] management," said Eamonn Hughes, financials analyst at Goodbody, referring to the share buybacks. "It reduces the government's investment and increases returns. If you buy back shares at a discount it becomes very accretive."
A spokesperson for NatWest said the cost of capital factored into both the decision to close Ulster Bank and for NatWest to buy back shares, but said the rationales were "entirely separate".
"The rationale for Ulster Bank was that we couldn't generate sustainable returns from the business," she said. "Capital has been built up specifically to buy back shares and this was our first opportunity to do that since 2018."