Increasingly likely Ulster Bank in the Republic will be wound down, business figures warn      

The bank is dwarfed by the huge market shares of AIB and Bank of Ireland
Increasingly likely Ulster Bank in the Republic will be wound down, business figures warn      

John Teeling, a longstanding Ulster Bank customer, said any exit could further dent banking competition and customer choice, and increase borrowing costs.

Ulster Bank operations in the Republic will likely be wound down and the loan books sold off, strengthening the dominance of AIB and Bank of Ireland, analysts and leading business figures have warned.  

Ulster parent NatWest, formerly known as RBS, launched an unexpected review of its operations in the Republic last September and has since said little to dissuade observers it will decide to do anything other than run down the bank. Fears that Ulster will exit have risen after reports it may already be willing to sell off parts of its mortgage and small-business lending.  

Ulster is the third-largest mortgage and corporate lender in the Republic with a total loan book of €20.5bn. It has 88 branches and employs 2,800 people, but it is dwarfed by the huge market shares of AIB and Bank of Ireland. The review does not apply to the North, where it is one of two dominant players.             

Experts warn that its exit would diminish banking competition further, and at the very least ensure that mortgage and SME interest rates — already among the most costly in the eurozone — would remain at an elevated level.

Leading businessman John Teeling, a longstanding Ulster Bank customer, said any exit could further dent banking competition and customer choice, and increase borrowing costs. Any exit “certainly wouldn’t reduce costs” for customers, he said.

Mr Teeling, whose business interests include whiskey-making, mining, and exploration, has been a business customer of Ulster for 15 years, mainly through Teeling Whiskey. 

Pub owners, already under considerable financial strain since the start of the crisis, are also concerned.

'Further uncertainty'

 “It is creating further uncertainty for pubs and other hospitality businesses during an already very uncertain time for the sector,” said Licensed Vintners Association chief executive Donall O’Keeffe.

Isme chief executive Neil McDonnell said that Irish banking customers were "in a bit of a pickle" because the banking model of two dominant banks was not working. Isme surveys show that 40% of its members are banking with AIB, and 40% with Bank of Ireland, which leads to a "duopoly" in a market over which the Government has little leverage.   

Goodbody financials analyst Eamonn Hughes said all the signs were pointing in the direction that the NatWest owner will run down the bank's operations, even though the announcement could still be some time away. 

As the number three player in the Republic in an era of low interest rates, the bank has likely become unsustainable for NatWest, Mr Hughes said.  

Davy analyst Diarmaid Sheridan said one of the reasons that Davy thinks Ulster will exit is that no matter what it has tried to do over a number of years, including selling non-performing loans, it has come up against new challenges.   

It has faced the headwinds of low interest rates and an environment that makes it difficult for one of the smaller banks to generate the returns that the parent company is probably looking for, Mr Sheridan said.

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