Ulster Bank losses soar to €1.7bn

Ulster Bank made an operating loss of £1.457bn (€1.7bn) in 2013 compared with £1.040bn the previous year, as the company accelerated the transfer of its non-core assets to its bad bank.

According to Ulster Bank’s chief executive, Jim Brown, the bank will show a post-provision profit in 2014 — the first since 2008.

As part of a group-wide restructuring, its parent Royal Bank of Scotland set up a bad bank, known as RBS Capital Resolution (RCR). It took an additional charge of £911m as it expedited, “the resolution of underperforming, capital-intensive assets and allow Ulster Bank to focus on building a stronger core business for its future”.

However, stripping out the effects of the £911m charge, the operating result was £494m better than in 2012 on lower impairment losses in the mortgage portfolio and higher income. Impairment losses at £482m were 35% lower than the previous year.

The loan-to-deposit ratio fell from 130% to 120% over the 12-month period. There has been a considerable improvement in the net interest margin (NIM). Over the 12-month period, it averaged 1.91%, though this had risen to 2.1% over the last three months of the year. Ulster Bank chief executive Jim Brown said the target NIM was 2.5%-2.75%.

Mortgage impairments fell 64% to £235m from £646m. The number of customers in mortgage arrears of over 90 days fell for nine successive months to the end of the year.

Total income increased by 3% to £871m for the year on hedging gains made in the mortgage portfolio. Net interest income was £631m for 2013, which was a £18m decrease “largely driven by lower interest-earning assets and a higher cost of funding”.

Total expenses increased by £33m or 6% to £554m, driven by the costs of mandatory change programmes, such as the Single Euro Payment Area, an investment of £10m in support for customers in financial difficulty and an accelerated depreciation charge of £12m, said Ulster Bank in a statement.

RBS made a pre-tax loss of £8,243m for the year.