Ulster Bank may sell more loans to reach EU bad-debt average by 2020

Lender sets aside money for expected fines related to tracker investigation

Ulster Bank’s chief financial officer said €295 million of provisions set aside by the bank to deal with the tracker-mortgage scandal included money to cover an expected fine from the Central Bank.

Ulster Bank, which is currently selling €1.6 billion of distressed mortgages, may seek to dispose of more non-performing loans (NPLs) to reduce its bad debt level to the European Union average by the end of the decade, the company's interim chief executive has signalled.

Speaking at an Oireachtas finance committee hearing on Tuesday, Paul Stanley, who is also the bank's chief financial officer, said that while further loan sales may be on the cards, the bank has made no decision on the matter.

The current portfolio sale, consisting of €900 million of owner-occupier loans and €700 million buy-to-let mortgages, will lower Ulster Bank's NPL ratio from 17 per cent to 11 per cent when completed in the second half of this year. However, euro-zone banks with high levels of NPLs are under pressure from the European Central Bank (ECB) to cut them to the 5 per cent EU average at pace.


“Not all mortgages are sustainable and we are obliged to reduce the level of non-performing loans on our balance sheet,” said Mr Stanley. “For mortgages that are not sustainable, additional forbearance will not bring them back to a performing position.”


Ulster Bank appearance before the committee is the first since the bank conceded in March that up to an additional 2,000 of its customers were impacted by the country’s tracker-mortgage scandal. It brings the bank’s total number of customers hit by the controversy to almost 5,500.

Mr Stanley said €295 million of provisions set aside by the bank to deal with the issue included money to cover an expected fine from the Central Bank. Regulators are carrying out enforcement investigations into all five main retail banking groups, who account for most of the 37,600 customers identified to date as having either been denied a right to cheap mortgages linked to the main ECB rate or were otherwise overcharged.

Law changes in 2013 doubled the maximum monetary penalty the regulator can impose on a financial firm for rule breaches, from €5 million to €10 million, or 10 per cent of turnover. However, sources have previously said that any potential rule violations are likely to have occurred before the threshold was raised.

As of Monday evening, Ulster Bank had paid redress and compensation to 2,900 of the 3,490 customers who had been acknowledged before March, with the remaining expected to be completed by early July. However, there are an additional 100 affected former customers that the bank is struggling to locate.


It plans to contact the remaining 2,000 customers by the end of the month.

Mr Stanley also said he expected the group, which has cut its branch network to 88 outlets in the Republic from 190 before the crisis, to cut more in the future. However, he said the bank’s online banking and mobile offerings needed to be improved before further closures occurred.

Ulster Bank executives revealed on Tuesday that an issue where money temporarily disappeared from customer accounts in April was due to an error made by an official in the lender’s parent, Royal Bank of Scotland (RBS), in the UK.

Ciaran Coyle, managing director of retail banking at Ulster Bank, said the individual “inadvertently took down part of the process in Ulster Bank that transmits files” as RBS implemented tweaks on its own systems, linked to a regulatory change, over a weekend. Ulster Bank has since “put in place specific controls” to make sure that if such an error was made again in future an alert would be signalled “before it impacted our customers”, Mr Coyle said.

Meanwhile, Mr Stanley said RBS chief executive Ross McEwan had personally given him a commitment that the group planned to hold on to the Irish unit.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times