Royal Bank of Scotland chief executive Ross McEwan said on Friday that the Government and regulators in the Republic are making the market "difficult", as he pledged to take a more hands-on approach to boosting the performance of its Ulster Bank unit.
The comments came after RBS said Ulster Bank's operating profit slumped almost 66 per cent in the first quarter and it set aside more money to absorb impaired loans and the cost of resolving "legacy business issues".
“It’s quite a difficult market in Ireland to operate in from the regulatory framework, but also the Government have put a lot of pressure on banks and there’s a number of reviews going on across the banking sector,” Mr McEwan said on a call with analysts after the publication of RBS’s first-quarter results.
As the Central Bank continues to oversee a review into tracker mortgages, Ulster Bank revealed this week that its previously-disclosed 3,500 customers hit by the scandal is set to rise by between 1,500 and 2,000. The controversy centres around borrowers across the industry either having been denied their right to a low-cost mortgage linked to the European Central Bank's main rate, or put on the wrong rate, over the past decade.
As a result, the Government has also asked regulators to carry out an assessment of current behaviour and culture in banks, which will be completed later this year.
Mr McEwan said that RBS is “now very concentrated on” Ulster Bank and that it expects to deliver improved returns from the business over the next 12 to 24 months. RBS reaffirmed its commitment to Ulster Bank in the Republic in late 2014 following a review of the business in the wake of it receiving a £15 billion (€17.3 billion) parental bailout during the financial crisis.
Ulster Bank, which is understood to be lining up senior RBS official Jane Howard as its next chief executive after Gerry Mallon signalled in January he was quitting to head up Tesco Bank in the UK, plunged into a €151 million operating loss last year as it set aside an additional €192 million to cover refunds, compensation and other costs related to the tracker mortgage controversy and other incidences of overcharging.
Tracker mortgage issue
All told, the bank has ringfenced €298 million in recent years to deal with the tracker mortgage issue.
Ulster Bank reported a €11 million operating profit for during the first quarter of this year, down from €32 million for the corresponding three months last year, RBS said on Friday.
While Ulster Bank released €28 million of provisions in the first quarter of 2017 that had previously been taken for soured loans, it has taken a €9 million charge so far this year. In addition, the bank booked €11 million “for remediation and project costs associated with legacy business issues”.
Meanwhile, Mr McEwan said that Ulster Bank will begin to sell some loan books "in the next six months". The non-performing loans sale could involve 7,000 mortgages, The Irish Times reported in February.