RBS aims for a much leaner operation

It was something of a mixed bag for Ulster Bank staff yesterday as its UK parent Royal Bank of Scotland published its annual results and unveiled its future strategic direction.

RBS chief executive Ross McEwan, who only took on the role last year, told analysts that Ulster Bank had been “problematic” for the group over the past six years. This is something of an understatement given that it has sucked up more than £15 billion in capital from RBS since the global financial crash in 2008.

The Northern Ireland arm of Ulster Bank will forge closer ties with RBS in Britain in terms of technology, marketing, and products and pricing.

More focus
In the Republic, McEwan said Ulster Bank would stop trying to be a number one or two in the market – positions long held by AIB and Bank of Ireland – and become a smaller and more focused "challenger" bank. "But we will not be deserting our customers in Ireland," he added.

This is welcome news given that Danske and ACC are the latest in a long line of international financial players that have exited the market here.

RBS stopped short of revealing the final size and shape of the business down south. That will come at a later date. Talks with the Irish Bank Officials Association are expected to begin in a fortnight’s time.

Ulster Bank chief executive Jim Brown indicated that the whatever locations remain will be more focused on advisory services rather than transactions. So more technology and fewer staff is the future.

Branch closures
A deal with An Post to allow Ulster Bank customers conduct certain basic transactions is likely to be put in place to counter the impact of branch closures.

Ulster Bank took hefty impairment charges last year but this should be the last such big hit. The picture on mortgage arrears is improving with 2,000 borrowers leaving the category. But it will still take three years to work through various legacy issues.

Brown confidently predicted that Ulster Bank would make a profit in 2014. We’ll see.

RBS recorded a loss of £8.5 billion in 2013, its biggest since being bailed out by the UK government in 2008. McEwan proposes to cut £1 billion from its cost base this year. Customers in the US will be offloaded later in the year as the bank directs its focus onto the UK market.

Some of the numbers surrounding RBS boggle the mind. It has 109 credit card propositions and 1,133 live websites. Its spends £90 million a year on postage and has a creaking technology platform.

McEwan will have his work cut out to turn around RBS and fulfil the board’s ambition to turn it into a “great bank”.