Operating loss jumps by 5% to €1.26bn at Ulster Bank

Ulster Bank made a £1.04bn (€1.26bn) operating loss in 2012, which is a 5% increase on the £984m loss in 2011, as mortgage arrears continue to mount.

The bank, which is a wholly-owned subsidiary of Royal Bank of Scotland, took an impairment charge of £1,364m last year, which is down marginally on the £1,384m charge it recorded in 2011.

Operating profit before impairment charges was £324m for 2012 compared with £400m the previous year. The bank attributed the lower profit to a scaling back in lending and a reduction in income driven by lower interest earning asset volumes. Total income for the year was £845m compared with £947m for the previous year. However, there has been an improvement in the cost base from £547m in 2011 to £521m last year.

Not surprisingly mortgage arrears continues to be the biggest drag on profitability.

There was a charge of £647m on the mortgage book last year compared with £570m the year before. However, there was an improvement in corporate loan arrears.

The property book took a charge of £276m compared with £324m in 2011. Other corporate lending took a charge of £389m compared with £434m the previous year.

At the end of last December, Ulster Bank had £28.7bn in net loans and advances to customers. The deposit book had risen to £22.1bn compared with £20.3bn the previous year. The loan-to-deposit ratio is 130%.

RBS posted a pre-tax loss of £5,165m for 2012. Most of the losses stemmed from an accounting charge of £4,649m for the revaluation of debt instruments and derivatives combined with the Ulster Bank losses. There were also penalties relating to the Libor scandal and the mis-selling of payment protection policies.

The UK state-controlled bank made an operating profit of £3,462m compared with £1,824m the previous year.

“RBS is four years into its recovery plan and good progress has been made. We are a much smaller, more focused and stronger bank. Our target is for 2013 to be the last big year of restructuring. There will be important work still to do, but an increasingly sound base from which to work.

“As the spotlight shifts to the ‘new RBS’ post restructuring, we are determined that it will show a leading UK bank striving to be a really good bank. By serving customers well, RBS can become one of the most respected, valued and stable of banks. That is our goal,” said group chief executive Stephen Hester.