RBS injects €480m into Ulster Bank

ROYAL BANK of Scotland (RBS) has injected a further €480 million in capital into Ulster Bank, bringing to €2.06 billion the total amount invested this year by the part-nationalised UK bank into its loss-making Irish subsidiary.

The latest injection was provided to the bank on September 30th, according to a filing lodged with the Companies Registration Office on Wednesday.

This is the fifth cash injection by the UK bank since February to boost capital levels to cope with increasing loan losses as a result of the collapse in the property sector and rising unemployment.

Ulster Bank said in a statement that the investment was part of “ongoing capital management” by Royal Bank of Scotland, which is 70 per cent owned by the British government. The bank said that the payment highlighted the parent company’s “commitment to Ireland and its ongoing support and investment in Ulster Bank”.

“It has been an unprecedented year for global banking,” said the bank. “Ulster Bank has already taken significant steps to address these challenges and adapt its business to the environment in which we now operate.”

Ulster Bank made a loss of about £500 million (€585 million) in the first half of this year as bad loans surged to £641 million.

The bank said that loan losses would continue to rise over the remainder of this year.

The bank has separated £15 billion in higher risk loans out of its £54 billion loan book into a “non-core” division that will be moved into the UK government’s asset protection scheme (APS) – an alternative to a “bad bank” plan where losses are written off over time.

Lloyds, which is 43 per cent owned by the UK government, has injected a total of €1.45 billion in capital into its Irish subsidiary, Bank of Scotland (Ireland), which owns the Halifax retail bank.

The UK bank has made two capital investment in tranches of €700 million and €750 million into the Irish bank.

Meanwhile, it is understood that Bank of Scotland (Ireland) does not intend to sell any distressed property loans to Asset Resolution Corporation (ARC), the fund management company set up by the bank’s former chief executive, Mark Duffy, and Dublin property fund manager Kevin Warren.

The bank plans to work through its problem loans on its own, according to sources with knowledge of the bank’s plans. ARC intends to make formal offers to the Irish subsidiaries of foreign-owned banks to purchase portfolios of property loans.