Ulster Bank may play key role in new banking force

Noonan keen to ensure bank does not join exodus of financial institutions

The Government and Royal Bank of Scotland have held talks about Ulster Bank having a role in a third banking force here, The Irish Times has learned.

Talks are believed to be at an early stage, but could involve a tie-up with Permanent TSB, which is 99.2 per cent State owned, along with involvement from private equity firms.

RBS which owns Ulster Bank has been reviewing its future for the past five months. Last week, the UK bank said it would “continue to explore further opportunities to transform” Ulster Bank business in the Republic.

It is understood that RBS has set up a team internally to look at its strategic options for Ulster Bank, which has received a £15 billion bailout from its parent company since 2008 and made an operating loss of £1.5 billion last year. It is led by a senior member of its restructuring team.

Financial backing
The UK bank is believed to have held talks with a number of private equity firms about providing financial backing for a new venture here. RBS chief executive Ross McEwan met Minister for Finance Michael Noonan on February 10th during a brief visit to Dublin. It is believed that they discussed the Government's idea for a third banking force.

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The Government is eager to ensure that Ulster Bank does not join the exodus of financial institutions that have left Ireland over the past five years, with Danske Bank and ACC currently in wind-down mode.

Credible player
It also wants to ensure a credible player will emerge to challenge the dominance of AIB and Bank of Ireland in current accounts and mortgage lending.

Mr Noonan referenced the third banking force in his speech to the Fine Gael Ardfheis over the weekend. On RTÉ Radio One's This Week programme yesterday, Mr Noonan said he would like to see more competition in retail banking here.

“I’m sending a signal out to the European banking system that a growing economy in Ireland has space for more banking activity and we would welcome them participating in Ireland by way of subsidiaries or by way of going into partnerships with some of our domestic banks,” he said.

“I don’t have a fully formed plan for a third banking force. That’s not the point. I’m signalling now in advance of the need . . . for that kind of service and I’m hoping that will be taken up.”

Merging Ulster Bank and PTSB would not be without challenges. Both have substantial loss-making tracker mortgage books.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times