Ulster Bank says 35% of its €6.5bn SME loan book is distressed

About 35% of Ulster Bank’s €6.5bn SME loan book is distressed, management said yesterday.

Representatives of the bank — addressing the Oireachtas Jobs Committee on SME lending — also noted that while a certain amount of ‘warehousing’ of small business debt is considered, debt write-off is only considered when a client company is facing total closure and no other asset solution can be found.

The bank’s chief credit officer, Andrew Blair, said that Ulster’s SME clients are treated in the same way as its mortgage customers, in that regard, and that the fact that “only” 31 businesses on its books have gone into receivership since the beginning of the recession shows that its debt solutions are effective.

Chief executive Jim Brown said the bank has €1.2bn set aside for new business lending this year — up from €800m last year — and has seen a strong start to this year. Additionally, some €350m was provided for loan restructuring last year.

While the €1.2bn target for this year covers the island of Ireland, around €850m of that will be borrowed by firms in the Republic.

“We’re well-positioned, we have a strong pipeline of business, are growing market share and look forward to continued expansion into the SME market as both demand and the economy improves,” he said.

“We fully recognise the importance of the SME sector to the economy and are fully committed to supporting business and growth in the economy. SMEs are a large part of that focus,” he said.

Mr Brown was also asked whether Ulster’s lending activities might yet qualify for scrutiny by the Credit Review Office — currently only interested in Bank of Ireland and AIB.

He said that, although the bank has regular dialogue with the CRO, as much as 94% of its loan applications are approved, meaning the number of borrower appeals it receives is relatively small.

That said, he noted, of the decisions that are appealed, approximately one-third are re-approved.

While Ulster is seeing strong credit demand from the agriculture, food, and exports sectors, Mr Brown said it will continue to lend to viable businesses in the leisure sector. This is despite a number of property assets, including hotels, forming part of its legacy assets due to be wound down by its internal bad bank over the coming three years.