Ulster Bank to focus on cutting costs as lending rises

RBS is committed to retaining Ulster Bank operations in the Republic, but the round of cost-cutting will continue relentlessly, Ulster Bank has said.

Unveiling its 2015 earnings, Ulster Bank yesterday said that “good things” were happening on the lending side, with an increase in new loans to home buyers and businesses.

It said it had a large amount of capacity of lending in the pipeline for SMEs, too. However, the bank was determined to focus on all costs, amid its “ongoing cost-reduction programme”.

The third-largest lender in the Republic, Ulster reported operating profit had fallen to €362m, from €606m, partly reflecting the lower amount of write-backs in 2015, compared to the previous year.

Pension, litigation, and regulatory costs, as well as payments to RBS for services priced in sterling, had also weighed on earnings in 2015, it said.

Following a long review, Ulster Bank last year closed 15 branches, and interim chief executive Paul Stanley said yesterday that the bank would continue to look at how best to reach its customers via its tie-up with An Post offices and through its online operations.

On the outcome of any review, Mr Stanley said that no decision had been made as yet, but that the lender would identify where its customers wanted to do business with the bank, “and where we can get an economic return as well”.

He said that RBS was impressed by the economic-growth rates in the Republic, and that Ulster Bank was also focused on how it could best outdo its two bigger rivals.

Ulster Bank had all but run down the ‘bad bank’ operation which once held €4.8bn in loans, and was now running “significant” capital surpluses, which were helping to fund new lending.

It was eyeing returning some of that capital to its RBS parent, too. Mr Stanley said Ulster had increased mortgage lending, as the Central Bank introduced its new lending rules, but it was his personal view that the rules needed tweaking.

The regulators plan to conduct a review of the rules at the end of the year.

Meanwhile, parent RBS said it would take longer than planned to resume shareholder payouts, after it reported its eighth consecutive annual loss, driven by costs for past misconduct.

The shares had dropped the most since 2012.

The lender’s shares had dropped as much as 12% in the biggest intra-day decline since June, 2012.

The net loss narrowed to £1.98bn (€2.50bn) in 2015, from £3.47bn a year earlier.

Pre-tax profit, excluding conduct and litigation charges and restructuring costs, fell about 28%, to £4.41bn, missing the £4.45bn average estimate by analysts.

Chief executive officer Ross McEwan, 58, is facing a pivotal year in his efforts to resume dividends for the first time since the bank’s £45.5bn rescue by British taxpayers in 2008.

The bank said yesterday it was now “more likely that capital distributions will resume later” than his original target of the first quarter of 2017.

“I haven’t found any nuggets of good news,” said Ian Gordon, an analyst at Investec Bank, in London, with a buy rating on shares.

“You’ve got to be taking a greater than one-year view on capital return and a three-to-four year view on normalisation of earnings, and that’s a timeframe which exceeds most investors’ appetite.”