Business World

Tuesday 20 February 2018

Hester's RBS exit sparks Ulster Bank sell-off fears

RBS chief executive Stephen Hester is standing down after a boardroom battle
RBS chief executive Stephen Hester is standing down after a boardroom battle
Thomas Molloy

Thomas Molloy

THE departure of Stephen Hester from the helm of Royal Bank of Scotland (RBS) stoked fears in Dublin and Belfast yesterday about a possible sale of Ulster Bank.

Reports from sources close to the UK government said RBS may now look to get rid of the bank's non-performing businesses and highlighted the potential improvements to the RBS balance sheet following a disposal of Ulster Bank.

The sale of Ulster Bank at a knockdown price would be an enormous blow to Irish business which is already highly dependent on state-owned institutions.

Any further reduction in the number of lenders would almost certainly drive up the cost of borrowing and push down lending.

Mr Hester told this newspaper in an interview last week that RBS had looked at getting rid of Ulster Bank but had taken a decision to keep the Irish bank which operates on both sides of the Border.

Mr Hester said on Wednesday evening that he was leaving RBS following a boardroom battle. The bank confirmed yesterday that it will now sack thousands of investment bankers as it continues to focus on retail banking.

A UK parliamentary report last week suggested that one way of allowing RBS the freedom to lend more would be to swap Ulster Bank for assets in London belonging to the National Asset Management Agency (NAMA). That idea was dismissed as "kite flying" by NAMA chairman Frank Daly yesterday.

LOSSES

Some analysts dismissed the idea that Ulster Bank was likely to be hived off from its parent.

"I wouldn't necessarily anticipate any change in strategy – it is not clear to me that RBS has any better options than to 'work through' an extended turnaround programme in order to seek to minimise further losses," said Ian Gordon from Investec Securities in London.

"However, on this issue there will be fresh speculation and uncertainty – which I see as unhelpful both for Ulster Bank itself, and for the wider RBS group."

Mr Hester who declared Ulster Bank as part of RBS's "core" business during his tenure and the future of one of Northern Ireland's biggest banks will be dependent on the attitude of the incoming boss.

Northern Ireland Finance Minister Sammy Wilson last month had also suggested that Ulster Bank should have its bad debts hived off.

Mr Gordon said Mr Hester's departure is unexpected, especially after a relatively successful tenure. "(It's) surprising given recent apparent 'statements of intent' and unhelpful, given both the recently announced move of CFO Bruce van Saun and the current stage of the group's transition to recovery," Mr Gordon said.

"Hester has done an excellent job in the face of a wholly unhelpful regulatory and political backdrop – very substantially reshaping and de-risking the group," Mr Gordon added.

Irish Independent

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