Ulster Bank’s profits improved in the first quarter of the year, but ongoing Brexit uncertainty and heightening competition in the UK has increased the pressure on its parent Royal Bank of Scotland (RBS).
Ulster Bank generated an operating profit of €23m in the three months to the end of March, more than double the €11m generated in the same period last year.
Total income was practically unchanged, year on year, at €166m.
Net lending increased by €100m compared to the fourth quarter of 2018, with commercial loan growth driving the rise. A €13m impairment release reflected an improvement in non-performing loans, said Ulster.
In February, when reporting its 2018 annual results, Ulster Bank’s new chief executive in the Republic Jane Howard said the bank would be looking to undertake another loan sale sometime this year in order to further reduce its level of non-performing mortgages.
Ulster currently has approximately €2.8bn worth of non-performing loans on its books, accounting for 11.3% of its gross loanbook.
It expects to reduce that figure to closer to 5% by the end of this year.
Ulster Bank also said its tracker mortgage redress scheme is due to “substantially complete” by the end of this month.
On a group-wide basis, RBS reported lower first-quarter profit, hurt by intensifying competition and Brexit uncertainty, while its investment bank also registered poor returns.
RBS shares fell as much as 7%, with the results coming a day after chief executive Ross McEwan announced plans to leave within a year, marking a new era for the state-controlled lender.
RBS reported a net profit of £707m (€819m) for the period.
While above expectations of £546m (€632m) from a company-provided average of analyst forecasts, the figure dropped from £808m (€936m) last year.
The bank, still 62% owned by the British government, blamed tough trading conditions in the UK for the decline, particularly in the highly competitive mortgage market.
The pressure ate into the lender’s net interest margin which declined six basis points, quarter-on-quarter, to 1.89%.
The bank said uncertainty over Brexit would likely delay borrowing by business customers, making growth more challenging.
RBS’s slimmed-down investment bank performed badly over the period, with income down 41.4% on the previous year.
Mr McEwan said RBS was still committed to its investment bank, saying its performance was in “the middle of the pack” with underlying income down 8% quarter-on-quarter, amid poor results for rivals across the banking industry.
Mr McEwan said he believed the numbers were a “solid set of results against an uncertain economic and political background”.
Profit at rival British bank Barclays fell 10% in the first quarter as its under-pressure investment bank struggled, prompting it to signal further cost cuts if these conditions persist.
RBS launched a global hunt for a successor to Mr McEwan on Thursday, with top RBS executive Alison Rose tipped as the leading candidate.
Two consecutive years back in the black allowed the bank to pay its first dividend in a decade for 2018.
- Additional reporting Reuters