Ulster Bank is to remain in the Irish retail banking market, with its parent, Royal Bank of Scotland, describing it as a core part of its business.
However, RBS — which is creating an internal ‘bad bank’ in order to deal with nearly £38bn (€44.8bn) worth of troubled assets — added that Ulster’s cost base will need “substantial restructuring” if the bank is to remain “attractive”.
Ulster will transfer £9bn worth of non-core loans into the new vehicle, but RBS said the Irish bank’s cost-to-income ratio (61% in the first half of this year) would have been higher if the income from the £9bn of loans hadn’t been written in the first place.
“A viable Ulster Bank will need to match its costs to the income that can be generated from a smaller balance sheet, one that comprises only better quality lending in sustainable segments of the market,” RBS said yesterday.
RBS — which also yesterday reported group losses of £634m for the third quarter and saw its shares dip 6% — said that while Ulster fits with its core capabilities, and as Northern Ireland’s largest bank is important to the health of the British economy, “a sustainable operating model needs to be found for it, so that it is a viable business in a normalising Irish economy.”
RBS’s chief, Ross McEwan, will include Ulster in his wider review of the group, to be completed in February. But, he noted yesterday that Ulster remains an important business for the whole island of Ireland, adding “we understand the need to get this right“.
News of RBS/Ulster’s commitment to Ireland will come as a relief in the wake of both ACC and Danske pulling their retail arms. A spokesperson for Ulster here welcomed the update and said it remains “business as usual” for customers.
Finance union, the IBOA, gave a cautious welcome to the future plan for Ulster Bank, saying it bucks the trend of foreign-owned banks downsizing to the detriment of their employees and customers. However, IBOA chief, Larry Broderick said he wanted further clarification on how the transfer of Ulster’s £9bn of loans to RBS’s bad bank would affect staff and what the wider group review might mean for Ulster’s business in Ireland.
Overall, though, Mr Broderick said yesterday’s announcement offers more certainty for staff.
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