Ulster Bank ‘committed to Ireland’ despite rising losses

Royal Bank of Scotland said it is committed to maintaining its presence in Ireland despite a rise in operating losses at its Irish subsidiary Ulster Bank to £1.457 billion from £1.040 billion in 2012.

Ulster Bank’s profits before impairment charges amounted to £317 million for the year, down slightly from the 2012 figure of £324 million. Impairment charges for 2013 rose from £1.36 billion in 2012 to £1.77 billion last year.

“We’ve been here for 178 years and we’re here to stay,” Ulster Bank chief executive Jim Brown said this morning.

Speaking to RTE Radio Mr Brown said jobs would be at risk in the coming years as the bank winds down assets in its bad bank and mortgage arrears ease.

RBS chief executive Ross McEwan said Ulster Bank was currently reviewing its operations in Ireland, with a view to making it "viable and sustainable into the future".

“We are accelerating our strategy for the bank to improve service to our customers, reduce costs and simplify our operating model,” he said.

Mr McEwan outlined plans for closer integration between its operations in Northern Ireland personal and business franchises in the UK, while in the Republic they will continue to explore opportunities “to be a compelling challenger bank to the domestic pillar banks”.

“Our customers in the island of Ireland need to know that we are committed to providing them with a great everyday banking service. We will finalise our plans in the coming months - but this is about a change in business strategy not a withdrawal from the market.”

RBS was forced to pump £14.3 billion pounds into Ulster Bank from 2009 to 2012 after the property market crashed, but the lender has said arrears cases of more than 90 days have dropped every month since March.

“While underlying trends in the core Ulster Bank continue to recover, we would not be surprised to see the bank seek to merge with other small players in the coming year as it seeks scale,” Merrion Capital analyst Ciaran Callaghan said.

Mortgage lender Permanent TSB Group Holdings Plc is one merger candidate, Mr Callaghan said.

Ulster Bank’s mortgage losses fell 64 per cent to £235 million pounds in 2013, the bank said today.

Losses excluded a £3 billion loan impairment charge in its non-core unit, which was set up in 2009 to house loans it planned to run down.

The Irish Bank Officials Association said the union was concerned that the future proposed for Ulster Bank appears to be one built on even fewer branches, even fewer employees and an operational model which will undergo further change.

“Staff as well as customers want to know what kind of Ulster Bank will exist in the future and what, if any, changes are likely to branches, structures and jobs,” said IBOA general secretary Larry Broderick.

RBS losses

Today RBS posted a full year loss for 2013 of £8.2 billion, its biggest full-year loss since receiving a UK government bailout in 2008, with the group’s chief executive Ross McEwan outlining plans to shrink its investment banking and overseas operations.

The Edinburgh-based bank has set aside about £3.8 billion toward the cost of compensating clients and logged about £4.8 billion of provisions as it starts a bad bank.

Mr McEwan said the lender will reduce risk-weighted assets in the international banking and securities unit by £50 billion by 2020, lower costs by £5 billion over the next four years and cut more jobs as he overhauls the firm.

More than five years after giving RBS the biggest bank bailout in UK history, the government still hasn’t been able to cut its 80 per cent stake in the lender.

“The actions following our strategic review will start to drive cost reductions and improve efficiency during 2014,” RBS said in the statement.

“We expect elevated restructuring costs in the next two years to get the bank’s customer service and costs back to best in class levels in all respects.”

RBS reported an operating loss after one-time items of £8.2 billion, compared with a loss of £5.28 billion in 2012.

Additional reporting: Bloomberg