Ulster Bank reports 76% profit fall on bad debts

Cormac McCarthy, chief executive of Ulster Bank, the Irish unit of Royal Bank of Scotland, said the lender is seeing a rise in loan impairments in Ireland. The Ulster Bank Group announced a 76 per cent fall in operating profit to £117 million (€130.5m).

Impairment losses in Ulster Bank rose to £394 million, reflecting the impact on credit quality of the slowdown in the Irish economy. The bank said the last three months of 2008 has seen a notable decline in both activity and sentiment.

The bank said this was reflected in sharp rise of cases into the problem debt management process.

He also said the next couple of years are going to be difficult for the industry.

Net interest income increased by 1 per cent, with average loans and advances to customers up 12 per cent in the year.

"I think it is going to be extremely difficult. There are plenty of grounds for pessimism but one has to be optimistic," Mr McCarthy told RTÉ's Morning Irelandwhen asked about the future.

“Downturns are followed by upturns, it will come; when and how I can’t say but what we have done in Ulster Bank is to prepare ourselves to come out the other end.”

Asked about his remuneration Mr McCarthy said senior management at Ulster Bank have had a pay freeze this year: “I myself have had no bonus for the last year. My pay this year will down on last year quite significantly.”

He declined to provide a figure but said the percentage decline would be over 40 per cent.

Ulster Bank said although loans and advances were up 12 per cent, other income was 12 per cent lower reflecting a slowdown in the bancassurance and wealth businesses.

The bank said average mortgage balances in Ulster Bank were 11 per cent higher than 2007.

The rate of new mortgage lending slowed significantly in the second half of the year while average deposit balances in Ulster Bank were largely flat year-on-year.

According to Ulster Bank, deposit flows were strong in the latter part of the year and into the early months of 2009.

Direct expenses rose by 8 per cent to £432 million, reflecting the full-year impact of the investment programme in Ulster Bank’s footprint and operations.

Ulster Bank’s parent, RBS, announced UK record losses of £24 billion today and announced it would seek job cuts and to sell certain business, without specifying which ones.

Ulster Bank is cutting up to 750 jobs across its businesses on the island of Ireland and its sister bank, First Active, will cease to exist as a separate entity after it decided to merge the two.

Mr McCarthy said the bank was implementing this strategy and did not suggest there would be further job losses in Ireland.