Any decision to wind down Ulster Bank in the Republic would be devastating for competition and put further power in the big two Irish lenders, senior brokers and consumer advocates have warned.
The warnings come after the revelation that Ulster Bank owner, the NatWest Group -- the London-based banking group which was until recently known as RBS, confirmed it was weighing the future of the lender in the Republic.
NatWest is 62%-owned by the British government.
In the Republic, Ulster is the third-largest mortgage and corporate lender with a net loan book of €20.5bn in a market already dominated by the big two lenders, AIB and Bank of Ireland.
The Dublin-run bank five years ago was split out from its operations in the North, where it commands a major market position.
The review by NatWest doesn’t apply in the North and the bank’s future there is secure.
Sources had confirmed that the review in the Republic could end in the winding down of the bank, and on Friday, a NatWest spokesperson confirmed that a review was underway.
“Our strategy to grow our Ulster Bank business in the Republic of Ireland organically and safely remains unchanged,” NatWest said in a statement.
“We continue to evaluate the impact of Covid-19 and the challenges to the economy and we are reviewing our strategy appropriately and responsibly in light of these events,” the Ulster Bank owner said.
In a message to its 2,800 staff, the chief executive of the bank in the Republic, Jane Howard, referred to “media speculation” about the future of the bank.
Banking experts are trying to understand whether the review was sparked by the Covid crisis, or reflects the difficulties facing all banks in making money in an era of low-interest rates.
Padraic Kissane, the financial services adviser, who is also a member of the Irish Banking Culture Board, said any decision by NatWest that lead to it winding down operations in the Republic would mean that corporate customers, in particular, would be hit hard.
Referring to the dominance of AIB and Bank of Ireland, banking competition would only get worse, if the market were to be left to the “two big elephants”, Mr Kissane said.
However, he remained hopeful that London-based NatWest would see the benefits of having lenders in the euro and sterling zones.
Michael Dowling, a leading broker and mortgage market expert, said losing any bank would mark “bad news for any economy”.
Mr Dowling said any adverse decision would reinforce Permanent TSB as the next largest lender, but added that PTSB has struggled for years.
Belgian-owned KBC Bank Ireland, the challenger lender, has the wherewithal to buy Ulster Bank, but it has struggled to build its mortgage share in Ireland beyond 12% despite offering competitive mortgage rates, he said.
Dermott Jewell, policy adviser to the Consumers’ Association of Ireland, said the review showed that “all is not well in the economy”.
The challenges facing banks were “quite significant”, Mr Jewell said.