Ulster Bank may have recorded another €1bn-plus euro loss, but it is committed to staying in the country and playing its role in the economic recovery, according to chief executive Jim Brown.
The pledge will come as welcome news to Finance Minister Michael Noonan. There has already been an exodus of foreign-owned banks over the past 18 months, which leaves a shrinking pool of domestic banks. Bank of Ireland is well on the way to full fitness and is actively lending. Market sources say AIB is gradually becoming more engaged, although it is still struggling with high levels of non-performing loans.
However, unless the European Commission agrees to Permanent tsb’s restructuring plan, and the ECB or some other institution steps in to write a cheque for its proposed asset management unit, it is hard to know what future, if any, the company has.
There has been uncertainty about the fate of Ulster Bank since the British chancellor of the exchequer announced a good bank/bad bank split for the deeply troubled Royal Bank of Scotland. Ulster Bank was cited by Mr Osborne as one of the assets that could potentially be heading for the bad bank.
It is believed that in 2012 the previous RBS CEO, Stephen Hester, had proposed that Ulster Bank be either cut loose or closed down. However, an agreement brokered between Mr Noonan and Mr Osborne ensured that the heavily loss-making Irish subsidiary was kept open.
Since 2008 RBS, which is 82% owned by the British taxpayer, has pumped just under £15bn (€18.2bn) into Ulster Bank to cover losses from its exposure to the property market.
Mr Brown says the bank will remain in the Irish market as a full service operation focused on mortgage, SME and corporate lending. The bank doubled its lending in January compared with the same month last year, he added.
However, it still has to get its cost base down. This includes more branch closures. There are 236 branches on both sides of the border and this could shrink to 175 as customers move increasingly online. Moreover, as reported last week by this newspaper, more head office functions will be moved to the UK over the next three years.
Ulster Bank has an €11bn mostly loss-making tracker mortgage book. It will remain part of its core operations. Mr Brown said it is looking at hedging strategies that will help improve the profitability of these tracker mortgages.
The transfer of its non-core assets to RCR will greatly enhance the bank’s flexibility in the Irish market. But with a parent company still in deep trouble, it remains to be seen what role it will play.
© Irish Examiner Ltd. All rights reserved