Huge impairment charges cause bank to lose €361m

ULSTER Bank saw underlying profits for the first half of this year wiped out by a more than 200% increase in impairment charges, resulting in an operating loss of £314 million (€361m) for the six months to the end of June.

While the underlying first-half operating profit of £185m amounted to a 20% year-on-year improvement; a huge rise in impairment charges reversed that figure into a significant loss.

Ulster Bank’s impairment charge – money set aside to cover bad loans, or those unlikely to be repaid – for the six months amounted to £499m – up from £157m for the same period last year; boosted by the bank’s over-exposure to the property sector.

The bank’s outgoing chief executive Cormac McCarthy said yesterday that the impairment issue is a process the company has to work through and will potentially taint the business balance sheet for another year or so.

He added that it was very difficult to predict an outlook for the second half of the year and “too hard to call” how much of an impairment charge will be necessary for the full year, as the trading environment in Ireland remains “very difficult and volatile”.

He also said that Royal Bank of Scotland (RBS) – Ulster’s parent company – remains committed to its Irish operations, is happy with the measures being taken to control operating costs and ultimately “recognises we’re working through an issue here”.

On a more positive note, Ulster Bank did see customer numbers rise by 3% – with another 49,000 people added – on a year-on-year basis during the six months; bringing total customer numbers to about 1.9 million.

Some 10,000 of those new customers were picked up from the closure of rival bank Halifax Ireland earlier this year.

Good growth was also evident in the area of new current and deposit account openings, on the retail banking side.

Meanwhile, on a group-wide basis, RBS yesterday reported a profit of £9m for the first half of the year, up from a £1.04bn loss for the corresponding period last year.