RBS hires Morgan Stanley to advise on Ulster Bank

Royal Bank of Scotland has hired Morgan Stanley to advise it on potential merger opportunities for Ulster Bank in the Republic.

In an exclusive interview with Business This Week , Ulster Bank chief executive Jim Brown said RBS is carrying out an "operating model review" to work out options for the business in the Republic.

“We think there may be further consolidation in the market. We’re looking to see if Ulster Bank can play a part in that. Clearly though, that would have to result in us getting a better outcome than our current organic [growth] strategy,” Mr Brown said

John Davison, who heads RBS's strategic investment group in the UK, is also involved in the review. "We expect that it will take another couple of months for us to know the outcome," Mr Brown said.

He said Ulster Bank and RBS are interested in the Minister for Finance Michael Noonan’s plan for a third banking force.

“We would certainly look at it,” he says. “They are looking for a third banking force in the market. I would assume whether it’s organic or through some other option that Ulster Bank would be one of those three. The Government is aware that we are looking at other options.”

Permanent TSB and KBC Bank Ireland are the most obvious merger plays here but Mr Brown declined to identify its targets. "There's a lot of work to be done to see if its viable or not."

Ulster Bank employs 5,600 staff on the island and has 214 branches but Mr Brown said this will reduce within three years. “The staff numbers will be about 4,000 to 4,500 across the island... on the branch network we’ve said about 175.”

He expects a “significant number” will leave through “attrition” annually but it’s likely that there will also be some redundancies.

Ulster Bank is also looking to consolidate its office space in Dublin and is considering moving its head office from George’s Quay to Leopardstown. There are 700 spare spaces at its offices on George’s Quay. “We do have surplus property in Dublin and what we’re looking at right now is how we can best rationalise that.