RBS eyeing Ulster Bank cash injection

The injection of private equity funds into Ulster Bank and a merger with another bank, most likely Permanent TSB, are part of a plan being considered by Royal Bank of Scotland.

According to a report in the Sunday Times newspaper, Royal Bank of Scotland is in talks with the private equity firm, Warburg Pincus, to inject new cash into its wholly owned subsidiary, Ulster Bank.

Ulster Bank would then be merged with another bank, most likely Permanent TSB, to create a third banking force in the Irish market.

The injection of private equity into Ulster Bank combined with the merger would enable RBS to reduce its stake below 50% in its heavily loss-making Irish arm.

RBS, which is 82% owned by the British taxpayer, would no longer have to consolidate Ulster Bank’s losses on its balance sheet as a result of the move.

It has pumped roughly £15bn (almost €19m) into Ulster Bank since 2008 to shore up massive losses through its exposure to the property market.

Over the medium term, RBS and the private equity firm would be able to cash in through a floatation of the merged bank.

RBS, under its new chief executive, Ross McEwan have been looking at ways of solving one of its biggest problems prior to exiting state ownership, said the Sunday Times.

Ulster Bank made a €17m operating profit over the first three months of the year, compared with a €1bn loss for the same period in 2013.