To borrow an expression from a former US president, George W Bush, Ulster Bank is in “deep-do-dah”.
Managers have their wellies on as they try to clear up a mess not of their making, while trying to rebuild bridges with a customer base, much of which is in a state of fury, with accounts left uncredited, payments frozen and a cascade of problems raining down on businesses and householders alike.
A computer software glitch originating apparently in the IT department at Ulster’s parent, Royal Bank of Scotland, has had its greatest, most long lasting impact on its smallest offshoot. Counter staff in the bank’s branches have borne the brunt of this understandable customer frustration, while executives have been forced to appear, red faced, before parliamentary committees on both sides of the Irish Sea.
Ulster Bank CEO, Jim Brown has not fallen on his sword, but he has tripped over it, so to speak, by sacrificing his annual bonus.
He must be sorry he quit a high-flying job in Asia for banking’s version of the Twilight Zone, populated by zombie institutions in a financial version of the living dead.
The Kiwi, who spent his early career in his native New Zealand, enjoyed a 30-year career in Australia and the Far East before coming to Ulster Bank in Spring 2011
He arrived at a bank which was battered and bruised after it had shipped heavy losses from a series of unrealistic property plays at the height of the boom.
Gritting its teeth, Ulster’s parent, RBS — 83% owned by the UK government — pumped north of €12bn into the bank.
Unlike its competitor, HBOS, this parent decided to recommit to the Irish bank, mindful of the strong Ulster Bank brand.
Brown insisted that there were still “significant opportunities for Ulster”.
The CEO, of course, knew he faced a formidable challenge. Commercial property loans account for 35% of all loans. Add in mortgages and you have a property exposure accounting for three quarters of the total loan book.
Brown’s job was to shrink the loan book while at the same time target areas for expansion. He was confident these goals could be achieved.
A year on, big cracks in the Ulster vessel remain to be repaired. The annual loss exceeds half a billion euro, still.
Ulster Bank announced a near doubling in its impaired loans to €570m in February. Revenues have fallen from €975m in 2010 to just over €900m due, largely, to a squeeze in net interest margin.
This year has brought a gathering eurozone crisis and a slower than expected recovery.
In one area, at least, the crisis may have assisted things somewhat.
Brown targeted deposits for growth, aware of a soaring savings rate and the comfort to be had in a bank owned by the British sovereign during the existential crisis in the eurozone. It has been homing in on high-net worth individuals and people earning in excess of €140,000 a year.
Now, the IT debacle threatens to blow this strategy apart. No one really knows whether customers will act on the avowed intention of some, at least, to move banks once they can access their accounts. Ulster Bank chiefs must know that generosity and sensitivity will have to be available in liberal quantities yet this is a cash-starved bank with a cash-strapped parent. The financial sluice gates can only be opened so far.
There are, of course, potential beneficiaries, elsewhere. One unnamed analyst agrees that Bank of Ireland arguably stands to gain most, as the pillar bank nearest to normality.
AIB, on the other hand, is facing into a huge job and branch reduction programme, with all the problems in terms of lost staff morale and corporate memory this entails.
As for the rest, the less said the better.
Larry Broderick, head of the Irish Bank Officials Association expresses concern about the future for Ulster Bank.
With National Irish Bank having confirmed a move to a branchless service, the fear is Ulster Bank too could engage in more radical downsizing as its parent loses all confidence in the 175-year-old brand.
Broderick insists the picture for customers would have been far worse but for the existence of a strong branch network. He is trying to persuade RBS to locate more skilled expertise on the island and put on hold any plans to concentrate group-wide services in Britain, or low-cost locations.
Indeed, Ulster Bank has recommitted to its branch network by opening on Saturdays. It has also held on to a strong rural network, unlike its competitors.
Ulster still has real strengths in retailing, with a long tradition of service to SMEs. Jim Brown has indicated the bank is increasing its commitment to the food and agri sector. Broderick and his members hoped the parent will seize on these positives.
Organisations can, of course, recover from brand busting events. Take Toyota, which recalled millions of its cars after serious, safety defects were discovered. It has recovered financially from the battering in 2009.
Marketing experts stress the importance of using social media to communicate with customers in a crisis.
Larry Broderick criticises Jim Brown for falling short in the key area of communications. He believes he should have come out in public far sooner.
Most people concerned about the future of Irish banking will hope that Ulster Bank — viewed by insiders as Irish banking’s real “Third force” can recover its stride and start putting it up to the so-called pillar banks.
It may be that the bank may fare best under a new owner, with a real commitment to the Irish market. Given the recent partial restoration of stability and reputation to the country, and perhaps, an eventual restoration of order in the eurozone, could such a buyer be on the horizon?
* Born: 1836, Belfast.
* Parents: A group of Belfast merchants.
Christened the Ulster Banking Company.
* Original mission: To service a city with a population of 60,000 growing on the back of the linen trade.
* 860: First branch opened outside Ulster — in Sligo.
* 862: First Dublin office opened at College Green.
* 883: Change of name to Ulster Bank Ltd as limited liability is adopted.
* 915: Women employed for the first time, with many staff members away on war duty.
* 917: Ulster Bank amalgamated with London County & Westminster bank. Bank continues to be run by an advisory committee in Belfast.
* 926: Establishment of the bank’s ‘foreign department’.
* 930s: The Great Depression and collapse of linen and shipbuilding held back growth.
* 958: Personal loans pioneered in Ireland by the bank.
* 961: Ulster Bank opens Ireland’s first drive-in bank.
* 969: Profits exceed £1m a year for the first time.
* 975: Acquisition of Lombard Bank — extension into hire purchase.
* 980: Launch of the Henry Hippo saving scheme.
* 989: Launch of the Ulster Bank visa card.
* 997: New Georges Quay head office opened in Dublin.
* 2003: RBS acquires First Active. Its CEO, Cormac McCarthy, succeeds Martin Wilson as Ulster Bank CEO following merger of the two organisations.
* 2010: First Active absorbed into Ulster Bank.