It was another year of profit for Ulster Bank in 2015, albeit at a lower level than the previous 12 months due largely to a smaller amount of impairment releases.
For the first time, parent company Royal Bank of Scotland stripped out the performance for Ulster Bank in the Republic of Ireland.
This followed its decision last year to separate the company north and south of the border with the Northern Ireland unit now included in its UK personal and business banking division.
According to RBS’s annual report, the Ulster Bank franchise in the Republic is focused on improving returns by reducing its costs, given it is now a “smaller but safer business”.
Let's not forget that RBS was forced to provide a £15 billion bailout to all-Ireland Ulster Bank following the global financial crash in 2008.
The latest results show that Ulster Bank made an operating profit of €362 million in the Republic last year, down from €606 million in 2014.
This was due in large part to a halving of its impairment releases, which came in at €194 million in 2015.
Its net interest income fell by 22 per cent primarily due to the weakening of the euro relative to sterling. The bank also continues to be impacted by its substantial low-yielding tracker mortgage book.
Its total income amounted to €758 million, marginally ahead of the previous year. But its operating expenses increased to €590 million from €523 million in 2014.
A standout figure in Ulster Bank's results is the cost-income ratio of 78 per cent, up eight points on 2014. On Monday, Bank of Ireland reported a ratio of 53 per cent and its chief executive Richie Boucher wants to get it below 50 per cent.
Ulster Bank’s increase in expenses was attributed to higher pension, litigation and regulatory charges coupled with the impact of a weakening euro on its sterling cost base.
The bank said further cost savings were delivered in 2015 reflecting its “ongoing cost reduction programme”.
It recently agreed a new pay deal with staff, giving them an average increase of 2 per cent this year.
While welcome news for employees it adds to cost pressures and will raise concerns that the bank will have to undertake additional cost-cutting measures, possibly culling more branches.
Paul Stanley, Ulster Bank's interim chief executive described 2015 as another "solid" year for the company.
Ulster Bank strengthened its customer offering in 2015, with investment in its home loans business and a re-entry into the mortgage broker market.
Gross new mortgage lending increased by 53 per cent to €700 million in 2015. New lending to commercial customers increased by 65 per cent to €1.5 billion while the bank also signed a partnership with An Post.
However, it needs further impetus after years of painful retrenchment
and fire fighting.
New chief executive
To some extent, this task will fall to its new chief executive Gerry Mallon, who will join the bank in the summer.
Mr Stanley said Ulster Bank has made a “strong start” to this year and was “confident” about the outlook.
Its ambition is to become the number one bank for customer service, trust and advocacy by 2020.
It’s a fine goal but there’s a cautionary note in RBS’s annual report that could have implications for Ulster Bank in the Republic.
In his letter to shareholders, chairman Howard Davies said a key question for the UK electorate this year would be whether the country should remain in the EU.
“We are a UK-focused bank, but we have good businesses operating in other EU countries such as Ulster Bank in Ireland and many of our business customers heavily depend on unfettered access to the European Single Market,” he said.
“Most economic forecasts therefore point to a slowdown in UK growth, at least in the short to medium term, which would be unwelcome. Therefore, like any prudent business we are preparing for various potential scenarios.
“However, our primary responsibility is to serve and support our customers, and we will continue to do this, whichever way the UK electorate ultimately decide to vote.”