Ulster Bank chief executive Jim Brown has firmly ruled out debt forgiveness in the range of options it will offer customers to solve the mortgage arrears crisis.
"We do not support debt forgiveness,” he told the Irish Examiner following the release of the bank’s 2012 results.
“We are very confident that we can put in place an arrangement that meets the customers’ needs. We will work with customers on a case-by-case basis. We have a range of options and we will work with customers to resolve the issue, but debt forgiveness is not one of those options.”
Mr Brown said the average duration of a mortgage was between 20 and 25 years. The bank’s aim was to keep the mortgage holder in the family home. However, repossessions will inevitably go up among all the banks, he added. He would like to see a credit bureau set up that provided comprehensive details of every distressed mortgage holder’s total debt. Secured lending such as mortgages should be given priority in repayment schedules, he said.
He also welcomed the introduction of the personal insolvency legislation.
Moreover, he would like the Government to look at the landmark Dunne case. This refers to a Jul 2011 ruling by Justice Elizabeth Dunne that prevented GE Capital repossessing a home on the grounds of mortgage arrears because of a loophole in existing legislation.
Ulster Bank has 13,500 customers who are in receipt of some forbearance measures. Mr Brown says “mortgage arrears have peaked or are close to peaking.” He expects the pace of losses to gradually reduce over 2013. However, he declined to put a timeframe on when the bank is likely to return to profitability.
The bank has an €11bn tracker mortgage book. This book is burning capital because the margins do not cover arrears or the elevated cost of funding.
Ulster does not plan to hive off the tracker mortgage book into a special purpose vehicle. “What we have to do is reduce the losses and reduce our cost base.” However, if there was an industry-wide solution for tracker mortgages, then Ulster would be interested in taking a look. “But there is nothing in place at the moment.”
The bank’s net interest margin averaged 1.8% over 2012. The chief executive would like to see the net interest margin eventually reach 2.5%. The cost of deposits are still at a premium to what they should be and products are still not priced appropriately for the level of risk, he said.
The loan to deposit ratio is 130% and the aim is to reduce this to 100% through the continued divestment of non-core assets. The core tier one capital ratio is roughly 10%.
The current headcount is 6,000 but this will fall to 5,500 at the end of the year on the back of restructuring plans announced in 2012.
Its parent, Royal Bank of Scotland, has pumped over £15bn (€17.5bn) into Ulster since 2008 to shore up losses — which has in the past prompted speculation that it could be sold on or closed down. Mr Brown dismisses such speculation. “Ulster Bank remains a core part of RBS.”
The bank had a very high-profile technical glitch last summer that affected payment services to 600,000 customers over a five-week period. Its IT system is now fit for purpose though there will be investment to make it more robust, said the New Zealand-born CEO.
Mr Brown declined to comment about the property developer Seán Dunne. Ulster recently got permission to serve bankruptcy proceedings against him on foot of an outstanding €164m debt.
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