UK: Give us prime property for Ulster Bank

A British parliamentary proposal to give Ireland the loss-making Ulster Bank in return for Nama’s lucrative, London property portfolio would be rejected by the Government if it ever becomes a firm offer.

It emerged yesterday that the UK parliamentary commission on banking standards, which is looking into what to do with 82% state-owned Royal Bank of Scotland (RBS), came up with the novel proposal.

The UK treasury declined to comment because the report has not been published.

The banking standards commission, chaired by Conservative MP Andrew Tyrie, is in the process of coming up with proposals for RBS, which includes splitting it into a good bank and bad bank.

That report, when it is finished, will be sent to the treasury. The treasury will then take on board some of the recommendations.

A draft of the report was sent to members of parliamentary commission yesterday, which is believed to contain the proposal to swap Ulster Bank for some of Nama’s assets.

A source close to the treasury said this proposal was just one of many that would make it into the final report, “which makes it sound that it is an idea that is a lot more developed than what it actually is. At the moment, it is just speculation”.

Finance Minister Michael Noonan said the proposal would not be considered, although no official approach had been made.

Ulster Bank declined to comment.

At the end of last year, Nama had a portfolio of British assets estimated to be valued at €5.4bn, and 73% of these assets are located in London and the south-east of England.

Most of these assets are in prime locations and are among the best-performing of the entire Nama portfolio.

Battersea Power Station; the Louis Vuitton building on Bond St; Claridge’s hotel; the Berkeley and Connaught hotels; and the Citi Tower in Canary Wharf are among the iconic London properties Nama has off-loaded in the past.

On the other hand, Ulster Bank is still heavily loss-making. According to its last set of accounts, the bank made a loss of €1.26bn in 2012 following an impairment charge of €1.36bn.

RBS has had to pump over £14bn (€16.4bn) into its Irish subsidiary, Ulster Bank, over the past five years to cover losses stemming from the property crash, which has prompted speculation about its future.

However, last year the Irish Examiner reported that following an RBS strategic review, it decided to make Ulster Bank part of its core operations.

Many of its back office and other functions have been integrated into head office in London, which would make any divestment of the bank at this stage extremely difficult.

Moreover, it is believed that the troika would reject the proposal if it ever gained momentum.

The Government already owns 99.8% of AIB and Permanent TSB and has a 15% stake in Bank of Ireland.

There would also be a political backlash in the North to such a move.

Ulster Bank was founded in Belfast in 1836.