Growth in lending underscores profit at Ulster Bank

Good growth in net interest income and a boost in fees and commissions have led to a 7.6 per cent increase in Ulster Bank's interim pre-tax profit to £81.7 million (€124.5 million) from £76.6 million sterling in the six months to June 30th, 1999.

This growth was achieved despite a fall in dealing profits to £14.6 million from £20.2 million, reflecting the introduction of the euro and the consequent reduction in the value of foreign activity.

Underlying growth is better than the figures indicate. There was a special £3.2 million topping up in provisions which, if excluded, would point to underlying profit growth of 10.8 per cent.

Mr Martin Wilson, chief executive, said the results were "very satisfactory". Further growth was anticipated in the second six months. "The auguries are good," said Mr George Quigley, bank chairman.

In Northern Ireland, "decisive movement on the political front can unlock the considerable potential which is still far from being fully tapped, particularly if the distortions created by exchange rate disparities disappear in due course", he said.

In the Republic, which accounts for more than 60 per cent of profits, "the scale and sweep of the National Development Plan, funded by a partnership of Government, European Union and the private sector, will ensure that impressive levels of economic growth can be sustained". Ulster Bank had previously expressed an interest in ICC Bank, which has gone out to tender. Announcing the results, the bank said it had no specific comments to make on ICC Bank.

Net interest income rose by 8.5 per cent from £123.5 million to £134 million. Reflecting the competitive state of the lending market, the net interest margins fell marginally from 3.26 per cent to 3.25 per cent. The bank reckons its share of the market is 17 per cent and this is increasing. It has about 4 per cent of the mortgage market which is unchanged.

The second largest source of income (after net interest income) is net fees and commissions and these increased by 23.8 per cent from £44.1 million to £54.6 million. The investment management operations "produced substantially enhanced fee income", the bank said. "Cunningham Coates, the stockbroking business acquired at the end of last year, contributed to this result."

Asked if NCB, its stockbroking subsidiary, had lost any corporate clients since the senior executive defections in February, Mr Paddy McMahon, head of Ulster Bank

Markets, said the bank had not. "We are very happy with that business," stressing the bank was "in it for the long term".

Costs rose by 7 per cent to £112.5 million. This, the bank said, reflected growth in staff numbers to service the expanded business, and higher telecommunications and brand development expenditure. The cost/ in come ratio fell to 54.9 per cent from 55.8 per cent. Total bad debt provisions rose by 44 per cent to £10.4 million. This increase is attributed to a "significant increase in the general provision" to bring it into line with that adopted by its parent, NatWest. The charge for specific provisions amounted to £7.6 million. It represents 0.24 per cent of loans and advances, "reflecting the overall quality of the loan books".

Total income grew by 8 per cent to £204.6 million from £189.4 million. This, Ulster said, reflected strong growth in lending across all businesses and the substantial increase in fees and commissions.

Group lending rose by 9 per cent to £5.9 billion, with the greatest growth generated in the Republic. Deposits grew by just £9 million to £6.25 billion in the present low interest rate environment. However, the bank noted it was very successful with its many other non-deposit products, including tracker bonds.

"Our retail businesses performed particularly well and have substantially grown their operations," said Mr Wilson.

Ulster Bank Retail - which includes branch banking, the Lombard & Ulster finance companies, mortgages, cards, insurance services and invoice discounting - saw a 22 per cent rise in profits to £58.3 million.

Retail lending rose by 8 per cent to £4.35 billion, with 13 per cent growth in the Republic.

Ulster Bank Markets, which comprises treasury, corporate banking, investment management and stockbroking, had a £5.5 million reduction in profits to £23.4 million.