ULSTER BANK has reported a loss of £566 million (€656 million) for the first half of the year – £252 million worse than the same period last year – despite a slight decrease in bad loans at the UK-owned institutions during the six months.
The higher loss was due to a charge of £730 million for bad loans compared with £499 million for the first half of last year.
Ulster Bank’s owner Royal Bank of Scotland (RBS) only publishes operating performance for the core part of the Irish bank which has loans of £37.4 billion. A further £15.3 billion in loans in the non-core is being run down separately. The bank said the combined bad loan charge in the core and non-core divisions declined £49 million to £1.25 billion in the second quarter of the year.
Ulster Bank posted a loss of £189 million in the second quarter compared with a £377 million loss for the first quarter of the year.
Bad debts within the Ulster Bank core and non-core divisions totalling £2.5 billion represented 62 per cent of the impairment charge across the RBS group.
Impairment losses in the non-core division, totalling £1.8 billion, account for almost three-quarters of the bad debt charge within the overall RBS non-core division.
The impairment charge in Ulster Bank’s core business fell to £269 million in the second quarter of the year compared with £461 million in the first quarter. This arose from a “recalibration of credit metrics in relation to the mortgage portfolio”, RBS said.
“Credit conditions in Ireland will remain challenging with continued downward pressure on asset values coupled with rising interest rates maintaining pressure on borrowers,” the bank said. Bad loans rose in the non-core division due to falling land values and “impairments relating to a small number of large corporates”.
Impairments on the £9 billion in property development loans in the non-core division almost doubled to £1.3 billion in the first half.
“Further progress is being made on economic, political and regulatory reform in the Republic of Ireland and recent trends suggest a more positive medium-term outlook, although key risks remain,” said RBS. The figures showed increasing financial distress among mortgage customers at Ulster Bank, one of the top mortgage lenders during the boom.
Bad debts in Ulster Bank’s mortgage book jumped to 2.9 per cent of loans at the end of June 2011 from 0.9 per cent a year earlier.
The number of customers falling into arrears of 90 days or more on mortgages rose to 7.4 per cent of loans at June 30th, from 6.6 per cent three months earlier.
Two out of every five mortgages have a loan-to-value ratio of more than 90 per cent.
Ulster Bank said that it had agreed forbearance measures on £1.8 billion of the £21.8 billion in mortgages in June compared with £1.2 billion six months earlier.
Some 78 per cent of these loans are in the performing book.
The bank said it had “a number of initiatives in place aimed at increasing the level of support to customers experiencing temporary financial difficulties”.
Ulster Bank repossessed 98 properties in the first half of the year compared with 76 for all of last year. Some 78 per cent of repossessions were through voluntary surrender or abandonment.
RBS made a loss of £678 million in the second quarter of the year on the back of the bad loans at Ulster Bank and after taking losses on Greek government bonds.
The loss compared with a profit of £1.17 billion a year earlier.
The bank, 83 per cent State-owned, wrote off £733 million for expected losses on £1.145 billion worth of Greek bonds.
Ulster Bank had received about €7 billion from RBS to cover losses by the end of last year. A bank spokeswoman had no comment on whether this sum had increased.
