"We don't have this every time I do an interview," Gerry Mallon says with a smile as we prepare to tuck into some wonderfully fresh pea and mint soup, which is served in fancy china bowls in a meeting room at Ulster Bank's Dublin headquarters. "It's more to do with my schedule and the need for me to eat during the day."
The Northerner has been busy since completing his gardening leave with Danske Bank in Northern Ireland and becoming the first chief executive of the standalone Ulster Bank business in the Republic at the start of June.
Its parent company, Royal Bank of Scotland, decided last year to separate the Ulster Bank businesses north and south of the Border, with Mallon recruited to run the operation in Dublin.
As chairman of the Irish Football Association, Mallon should have been preparing for the Euro 2016 championship in France with the Northern Ireland football team – its first appearance at a major tournament in 30 years.
Instead, he ended up spending most of his time here, introducing himself to staff, and finalising its half-year results, which included a €118 million provision to cover the expected cost of failing to apply the correct tracker interest rate to mortgage customer in recent years.
“It was pretty hectic,” Mallon recalls. “The timing was difficult. My aspiration was to have been out for a sustained period in France with the team. But it wasn’t to be. Instead, what I managed to do was overnight trips for each of the games. It was worth it.”
Mallon is something of an accidental chairman of the IFA, having taken up the role in mid 2014. He played football in school and is an ardent Liverpool fan – he was at the so-called miracle match in Istanbul in 2005 when the Reds came back from the dead to win the Uefa Champions League – but he wasn't much of a footballer and never followed a club in the Irish Premier League.
“My career was cut short by a tragic lack of talent,” he jokes.
His skills as an economist, banker and former strategy consultant with McKinsey made him a good candidate to be an independent non-executive chairman of a body which has had its share of governance issues.
RBS will no doubt be hoping that he applies these skills in his new role. After years of fighting fires, Ulster Bank is back in profit and once again thinking about growth.
Mallon was attracted south of the border by the challenge following almost a decade with Danske Bank and its predecessor Northern Bank, seven of them as chief executive.
“I had largely fulfilled the opportunity that I saw in the Northern Ireland market,” he explains. “On the other hand, I see an enormous opportunity for Ulster Bank.
"I could see that in the Republic of Ireland there was a strong economy and a fundamentally strong bank with the weight of RBS's resources behind it, which could be a very powerful challenger in this market [to AIB and Bank of Ireland]. I had bumped up against Ulster as a competitor and I was more than aware of the capability of the organisation and the calibre of the people here."
Given that RBS had committed itself to owning Ulster Bank last year following a strategic review, Mallon says his brief when hired, was to “take the bank into the future and onto the next level”.
To “draw a veil over the resolution of the post-2008 crisis and start to fulfil the potential of the business”.
“You go and figure it out, Gerry,” is what he was told. “What is the best way to build this business? What is the best way to leverage what’s at your disposal? In all the discussions I’ve had . . . it’s been pretty much down to me [to figure it out]. It’s actually very liberating but also no less than I would expect if you come in to a job at this level.”
Its “far too early” to talk about Ulster Bank participating in any market consolidation, he says.
“There’s still a good, long job for Ulster Bank to run itself a bit better. My observation on the bank is that it’s a fundamentally strong franchise, it’s a sound bank, it’s got a mature market position but we have underleveraged our position as part of the RBS group.
“We haven’t brought the best of RBS to Ireland. The source of any competitive advantage that we have in this market is actually our position as part of the RBS group.”
World upside down
Mallon was hired last November and didn't envisage that, within 3½ weeks of taking office in June, voters in the UK would decide to quit the European Union and turn his world upside down.
He says the Brexit decision makes Ulster Bank a “valuable” strategic asset for RBS, given that it holds a banking licence in the EU.
“There are a number of banking licences in the EU that RBS holds. There’s certainly one in Germany, one in Ireland, the Netherlands and Sweden. So there are a number of strategic options for what RBS might be able to do, and suitable passporting arrangements that they’ll be able to put in place.”
In addition, some of Ulster Bank’s costs are denominated in sterling and have improved as a result of the currency’s recent weakness, while its profits and capital are now more valuable to RBS when translated from euro to sterling.
The bank has made an application to the Central Bank of Ireland to use some of its surplus cash to pay a dividend to RBS, in what will be the first repayment by the Irish bank of the £15 billion bailout it received from its parent post the 2008 crash. Mallon says it will be a €1 billion-plus figure.
A bigger issue is what impact Brexit will have on Ulster Bank’s customers. “I see that as a short to medium term challenge. [But] there’s no real sense of panic among customers. There’s clearly pressure on exporters with the value of sterling. It’s just more uncomfortable for them but there’s been no immediate fatal impacts.”
One Brexit impact was a pausing of the sale of Project Oyster, a €2.5 billion portfolio of non-performing loans that Ulster Bank was in the middle of selling when the referendum result emerged.
“It’s still ongoing. It was delayed slightly in the immediate aftermath of Brexit just to let the dust settle. There has been a shortlisting of a number of potential bidders. Now we’re back into the detailed data phase.”
He hopes to conclude the sale by the end of this year.
Mallon accepts that trust in Ulster Bank was “dislocated” following the crash, as it was for other banks in Ireland. RBS group chief executive Ross McEwan wants all of its constituent parts to rank first for trust with their customers.
But legacy issues still weigh on Ulster Bank. It faces a fine from the Central Bank for its failure in past years to apply tracker interest rates to certain customer accounts and the bank has taken a €118 million provision to cover the costs of redress.
However, Ulster Bank has not disclosed how many customers had the wrong interest rate applied to their mortgages or how many of them lost their homes as a result. It will begin communicating with the affected customers in the coming months.
“It’s still too early for us to say what the impact has been,” he says. “To the extent that anybody has been disadvantaged or perceives that they’ve been disadvantaged, I would certainly apologise.
“The future of this bank has got to be built on customer trust and integrity and about doing the right thing. I’m definitely sorry to anyone who has been disadvantaged by this or perceives that they have been. We still need to get to the bottom of the level of that detriment.”
He hopes that by “this time next year we’ll not be talking about it”.
“My focus is on doing the right thing going forward for the bank to try and sort out the issues of the past, and move on to doing something more positive.”
Ulster Bank’s sustainable banking report sets out five big goals for 2016, including lending €2.5 billion to help “people buy their homes and grow their businesses”, and to support customers to “embrace mobile banking”, with a target to increase uptake by 30 per cent.
Its lending growth is trending well with the bank claiming an 18 per cent share of new mortgages in the first quarter.
“There’s a number of things driving that,” he says. “We’re back in the broker market, we’ve had good competitive rates, we’ve been on the front foot in marketing and advertising in a way that we hadn’t been for a period of time, and other innovations include mobile mortgage managers who go to customers homes or their place of work to facilitate them.”
Ulster Bank’s focus is on fixed rather than variable rates, which is “where we see the opportunity at the moment. We’re responsive to our customers. We have a variable rate as well”.
Mallon is impressed by the renaissance of the Irish economy, describing it as “incredibly entrepreneurial . . . much more so than the North, with people willing to challenge the status quo and willing to take appropriate risks”.
He also believes we’re better at retaining talent in the Republic. “One of the biggest problems that Northern Ireland has is kids going away to college to other parts of the UK, and they don’t come home again.”
Mallon made that journey himself, to Cambridge, but did return home, albeit later, working for McKinsey in Dublin and London.
He is currently splitting his time between Dublin and Belfast, with the plan to move the family south of the Border on a full-time basis next year when his son’s school exams are completed.
Looking out five years, where does Mallon see Ulster Bank in the marketplace?
“In five years we will certainly be part of RBS,” he says without any equivocation. “In five years, we will be a valuable and profitable growing part of RBS. I think we will be regarded as a hungry innovator in the Irish market and somebody that is setting the benchmark for change and growth.”
GERRY MALLON ON...
...the potential for a rebrand in the Republic given that it has split from Ulster Bank in the North:
“There are no plans for it but I wouldn’t say that it is something we would rule out either. It’s certainly one of the options that’s out there.
“I would recognise that there’s scope for confusion, certainly internally but absolutely externally. You should expect to see the two businesses diverge over time. It’s still a powerful brand and it’s got a lot of heritage. So you’d be very slow to walk away from that unless you had something even more powerful to replace it with.”
...the future of bank branches (Ulster Bank has 110 in the Republic):
“It’s very difficult to come up with a number but almost certainly it is less than today. Technology is changing the way that customers interact. The transactional stuff is gradually going to diminish. My son is 15 and he’ll probably never write a cheque in his life.
“So branches will become more like a car dealership, where you go very infrequently... you go for something high-end and the place is top class in its physical manifestation of what the brand represents.
“We’re bound to reconfigure our network and some of that maybe closing branches, some of that might be new branch openings, and some of that might be changing the physical layout or the facilities that we’ve got.”
...the FAI poaching some of the North’s best footballers to play for the Republic:
“It definitely rankles with people in the North and the association. It’s seen as something that is divisive and unnecessary to be quite honest. There’s been very little of it at senior level in the past number of years but you still see some movement of players at junior level.
“The unfortunate thing about it is that it potentially brings sectarianism into football, which is just inappropriate. There’s clearly only going to be one set of Northern Ireland players who would have any aspiration to play for the Republic. That’s not the way I want to see Northern Ireland football develop. I would like to see every kid in Northern Ireland aspire to play for us.”
...on growing up in Belfast during the Troubles:
“I was born in the year the Troubles started in Northern Ireland. I was six or seven when we moved further south, out of the hotter areas of west Belfast. When you’re a kid, what you see every day is what you perceive as normal and it probably wasn’t until I went away to university that I really grasped that what I had lived through wasn’t a normal situation. I’m glad to say that life in the North is a lot more pleasant now.”
Name: Gerry Mallon
Job: Chief Executive of Ulster Bank in the Republic of Ireland
Family: Married to Una with four children
Lives: Splits time between Dublin and Belfast but family will move South in 2017
Hobbies: Goes to the gym and likes to travel for pleasure
Something that might surprise: Despite being chairman of the Irish Football Association in the North and an avid Liverpool supporter, he never played competitive soccer. But he did row while at college. "I rowed at Cambridge rather than for Cambridge. It's an important distinction."
Something we might expect: He feels his training as an economist has been useful in his career.