Ulster Bank got further capital top-up before Christmas

ULSTER BANK received another capital top-up from its parent company Royal Bank of Scotland (RBS) shortly before Christmas, just weeks after a €175 million capital injection from the part-nationalised UK bank.

The latest cash investment brings the total capital injections by the two UK banks in Irish retail banking – RBS and Lloyds, which owns Bank of Scotland (Ireland) (BoSI) – to in excess of €6 billion.

The investments have been made to bolster their capital to absorb loan losses on their combined loan books of €92 billion in Ireland – €60 billion at Ulster Bank and €32 billion at BoSI. The British government owns 84 per cent of RBS; 43 per cent of Lloyds.

The British banks have invested a proportionately higher amount of capital into their Irish units than the Government has into the State’s two main banks even though the Irish banks have much more loans in their home market.

The capital injections compare with a total of €7 billion invested by the Government into AIB and Bank of Ireland, which had combined loans of €264 billion at the end of their most recent financial half-years. AIB had outstanding loans of €133 billion at June 2009, while Bank of Ireland had €131 billion at the end of September 2009.

Ulster Bank is believed to have received a pre-Christmas capital injection of well in excess of the €175 million invested in November to boost its capital levels before the bank’s financial year-end. The injection has brought the total capital invested in the Irish bank to more than €2.6 billion.

The bank is expected to lodge filings in the Companies Registration Office in the coming weeks showing the December payment.

The latest capital injection was the seventh by the UK bank into its ailing Irish subsidiary in less than a year. RBS has been drip-feeding fresh capital into Ulster Bank, while Lloyds has injected larger sums over longer intervals.

BoSI received a further €2 billion from Lloyds just before Christmas, bringing to €3.45 billion the total amount invested over 12 months. This amounts to 10 per cent of the BoSI’s loans. The State’s injections into AIB and Bank of Ireland amount to 2.6 per cent of their respective loans.

“We continue to provide capital and funding support to BoSI, as we would do in the normal course of business and on an ongoing basis,” Lloyds said in a statement.

Ulster Bank posted a loss of £93 million for the nine months to the end of September 2009 after bad loans jumped to £301 million from £35 million. The bank has been forced to set aside more capital to cover losses on loans.

RBS chief executive Stephen Hester has said the bank has considering putting a “small” part of its loan book into the National Asset Management Agency, although Ulster Bank is not expected to participate in the scheme.