Ulster Bank to stay in Ireland, says RBS
Parent company affirms bank’s importance to ‘the whole island’
“I think the key issue now is to keep a very sharp focus on charges and making sure that we have a competitive banking sector,” he added.
Ulster Bank’s parent, RBS, which is 81 per cent owned by the British state, revealed the outcome of its four-month Treasury review into its future today as it said operating profits more than halved to £438 million in the third quarter on a year earlier.
The group avoided a threatened carve-up and nationalisation of its problem loans, and will instead run down the assets at a faster rate.
The Treasury’s report into RBS said “while Ulster Bank fits well with RBS's strategic footprint and core capabilities, a sustainable operating model needs to be found for it so that it is a viable business in a normalising Irish economy”.
It said there was “considerable connectivity” between Ulster Bank and the rest of RBS, and said as Northern Ireland’s largest bank, it was “important to the health of the UK economy”. The report added: “UK businesses benefit from a bank which is active in both the UK and Ireland, which remains one of the UK’s largest export markets.”
According to the Treasury review, Ulster Bank’s cost base will need “substantial restructuring” if the bank is to remain attractive. It said the cost-to-income ratio was 61 per cent in the first half of 2013 and would have been higher if the income from the loans being transferred to the internal bad bank had not been written in the first place.
The review said a viable Ulster Bank “will need to match its costs to the income that can be generated from a smaller balance sheet, one that comprises only better quality lending in sustainable segments of the market.”
Banking union IBOA welcomed today’s announcement but said more clarification was needed as to the future outlook for Ulster Bank.
“The commitment to a continuing future for Ulster Bank on the island of Ireland is welcome and reflects the Bank’s systemic importance as the second largest retail bank in Northern Ireland and the third largest in the Republic,” said the union’s general secretary, Larry Broderick.
“IBOA has a clear understanding of the need to restore the Bank to a sound financial footing. However, it is equally clear to us that this process needs to be carefully managed since drastic short-term measures can put the long-term future of the Bank at risk - if they result in a haemorrhage of loyal customers as well as committed staff,” he added.
Additional reporting: Reuters