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Ulster Bank soaks up a third of RBS's £45bn government bailout

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ROYAL Bank of Scotland (RBS) has pumped the equivalent of almost a third of its £45bn (€53bn) UK government rescue into bailing out Ulster Bank.

RBS's Irish division received a £2.93bn (€3.45bn) capital injection from its parent last year, bringing the total since 2009 to £14.3bn (€16.84bn).

Ulster Bank was acquired by RBS in 2000 and doubled its assets to £55bn (€54.8bn) in the four years before the property crash, according to a report published in 2011 by the UK Financial Services Authority (FSA).

That involved pumping out billions of euro in loans to property developers and house buyers.

While Ulster Bank accounted for only 3pc of RBS's assets in 2007, it has generated almost £13bn (€15.3bn) of bad loan losses.

"The severe losses suffered by certain UK lenders in Ireland partly reflects the aggressive lending practices they employed here," said Philip O'Sullivan, chief economist at Dublin-based NCB Stockbrokers.

"Strategies that were heavily based on expanding market share have backfired, though improved appetite for Irish assets of late may offer an escape route for some of the remaining distressed loans in their portfolios." Ulster Bank and Bank of Scotland, part of Halifax Bank of Scotland, until that lender was rescued by Lloyds Banking Group in 2008, competed "aggressively" with domestic competitors, offering new and riskier mortgages, according to a 2011 report on the country's banking crisis commissioned by the Government.

Ulster Bank's net loss narrowed to £2.2bn (€2.6bn) from £2.8bn (€3.3bn) in 2011, as loan impairment losses fell 37pc to £2.34bn (€2.75bn).

Capital

The capital injection from its parent last year was the smallest since 2009, the bank said.

In November, Ulster Bank was fined €2m by the Central Bank for failing to keep enough money in reserve to comply with regulations.

The lender was back in the spotlight last month after another IT glitch.

The problem affected account holders with Ulster Bank, NatWest and Royal Bank of Scotland.

Users of mobile applications for iPads, iPhones, BlackBerry devices and Android phones found they were unable to get access to their banking services on their mobiles.

Technicians spent hours working to restore the online service for customers in Ireland and across the UK.

Irish Independent