Saturday 25 January 2020

Ulster Bank parent 'optimistic' on Ireland despite €195m loss

Banks in Ireland 'turning a corner', says RBS

Donal O'Donovan

Donal O'Donovan

ULSTER Bank's parent Royal Bank of Scotland (RBS) is becoming "optimistic" about Ireland for the first time since the financial crisis began.

The optimism comes despite Ulster Bank reporting an operating loss of £164m (€195m) for the first three months of 2013.

That loss is down from a £310m loss in the same period last year, an almost 40pc improvement. The bank said the tapering off in losses reflects a reduction in "impairments", or the value that is written off struggling loans.

Impairment losses decreased in the period to €282m in the first three months of this year, from €472m in the same period in 2012.

The bank's overall income fell as Ulster Bank is squeezed between the relatively high rate it pays savers for their deposits and its shrinking loan book.

Net interest margin dropped to 1.85pc from 1.93pc over the period. It is a key measure of a bank's health that compares the cost of borrowing from the bank to the price it pays to borrow.

The amount of cash on deposit was up by 8pc to £22.7bn from the start of the year to the end of March.

RBS, which is majority owned by taxpayers in the UK following a bailout, said trends for banks in Ireland are "turning a corner."

Impairment charges at the Irish arm were down 27pc compared with last year.

The chief finance officer at RBS, Bruce van Saun, said: "It's been a long time, but we're starting to make cautiously optimistic statements for the first time (on Ireland).

"As the economic environment stabilises, Ulster Bank continues to make good progress on the restructuring of its core bank, with a significant decrease in operating and impairment losses, an increase in customer deposits, an improvement in the loan to deposit ratio, and a stable net interest margin."

Yesterday, Ulster Bank said its mortgage problems have reached a peak, but that government action is still needed to address the home-loan crisis.

"Mortgage arrears have plateaued over the past quarter. However, for arrears to improve and in addition to the activities which Ulster Bank is undertaking, commitments made to legislate on the Dunne ruling and to amend the CCMA also need to be delivered," Ulster Bank chief executive Jim Brown said.

Banks want legislation brought in to get around the High Court's "Dunne judgment", a ruling which has made it more difficult for banks to repossess houses.

However, the bank's core objective remains to keep as many co-operating customers in their homes as possible, he said.

Ulster Bank has been hit with a raft of problems in addition to losses on boom-era loans to property developers and house buyers.

It includes last summer's technology breakdown that left many customers unable to access their bank accounts for weeks on end.

Meanwhile, RBS said yesterday it wants the UK government to start selling shares in the rescued bank next year even though it could mean a loss for taxpayers.

Chairman Philip Hampton said the aim was to have the bank in strong enough shape to start preparing a prospectus for a sale from the middle of 2014.

"It could be earlier, that's a matter for the government," Hampton said in an interview on the bank's website.

Britain pumped £45.5bn (€54bn) into RBS during the 2008 financial crisis, leaving the government with a controlling stake. The taxpayer bailout includes massive transfers to support loss-making Ulster Bank here.

Irish Independent

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