Dividend outlook darkens for Ulster Bank owner RBS

Royal Bank of Scotland —owner of Ulster Bank — reported a sharp rise in losses in the first quarter yesterday and cautioned on the timing of a return to dividend payouts as lower income, restructuring costs, and sluggish asset sales underscored the challenges still facing the lender.

The Edinburgh-based bank, which was rescued with a £46bn (€59bn) UK state bailout during the financial crisis, has still not made an annual profit since 2007.

RBS is still 73% owned by the British government.

The plans of RBS on its dividend and the sale of its shares by the UK is closely watched here. Bank of Ireland — which is 14% owned by the Irish government — signalled earlier this week that it was hopeful of resuming paying dividends early next year.

Meanwhile, the sale of a 25% stake in fully-owned AIB may likely be delayed to next year, at the earliest.

In the latest quarter, RBS reported a net loss of £968m, up from £459m in the same period last year. Income dropped 13% to £3.06bn.

The shares slumped as much as 4%. RBS said Ulster Bank in the Republic had an operating profit of €78m in the quarter, down 6% from a year earlier, because of fewer write-backs.

Ulster’s income grew 11% to €205m and “new lending indicators remain positive”, with new mortgage lending increasing, it said.

RBS’s overall results were also hit by a £1.2bn payment to end the British government’s prior claim on any dividends, a £238m restructuring bill and a £226m impairment charge in its shipping loan portfolio.

That bill includes the mounting costs of separating its Williams & Glyn business.

Analysts are sceptical of the bank’s ability to deliver on its promise to divest the business by the 2017 deadline. “With the excess capital now being tied to ... the W&G surgery where we have no option but to trust management’s view on complications, we have decided to get out,” analysts at Bernstein said in a note to clients.

RBS did not record any major provisions for repaying customers mis-sold payment protection insurance but it warned that it expected to shell out more than £1bn in restructuring charges this year.

This would come on top of hefty penalties from the US authorities for mis-selling mortgage securities.

* Reuters and Irish Examiner staff