A bad week for Ulster Bank ended with it announcing first-quarter operating profits of €11m, down almost 66% on the €32m generated in the same quarter last year.
Total income for the three months to the end of March amounted to €165m, nearly 2% down year-on-year, but 9% down on the final quarter of 2017. Net loans and advances reduced by €300m compared with the fourth quarter of 2017, including a €200m reduction in the tracker mortgage book, the bank said.
Ulster Bank, which is owned by Royal Bank of Scotland (RBS), said this week that between 1,500 and 2,000 more customers had been identified as impacted in the tracker scandal, which happened when customers were wrongly put on more expensive loans by lenders across the industry.
The lender said it has not added to the €211m set aside for tracker scandal redress, despite up to 2,000 more customers potentially being affected on top of the almost 3,500 already hit.
It said it is on track to complete payments to those 3,490 customers by the end of June.
The bank also had to deal with a damaging public incident this week when customers noticed money missing from their accounts, leaving some unable to pay bills or direct debits.
What the bank called a “human error”, was described as an “IT problem” by Finance Minister Paschal Donohoe, leading to fresh questions about the suitability of the bank’s technology.
Davy said Ulster Bank’s first-quarter results highlight that in the absence of write-backs, the bank’s returns remain well below that required of the group.
“This will only substantially correct in the medium term given the large proportion of tracker mortgages and high capital intensity. In the near term, further cost efficiencies and lending growth should provide support,” it said.
Parent RBS showed signs of competition squeezing returns and business customers being unhappy with its services, which combined with a looming US Department of Justice fine to overshadow a forecast-beating first quarter profit.
Shares in RBS were down as much as 2% despite the British state-backed bank, which has spent the best part of the last decade trying to recover from a near collapse during the financial crisis, posting first quarter pre-tax profit of £792m (€903m), more than double analysts’ forecasts.
“This is a good set of results showing the progress we are making despite a more competitive marketplace,” chief executive Ross McEwan said. He would not comment on when an expected multibillion-dollar settlement with the US Department of Justice would finally be reached.
RBS had hoped to settle the case, which relates to its mis-sale of toxic residential mortgage-backed securities, as it is a prerequisite for the bank to resume paying dividends and for the British government, to start selling its 71% stake.
Analysts had expected RBS, which returned to annual profit for the first time in a decade last year after shedding trillions in assets and spending billions on restructuring, to deliver £319m in pre-tax profit.
RBS’s restructuring costs for the first quarter fell to £209m from £509m in the same period a year ago, while conduct and litigation charges were just £19m, down from £764m a year ago.