Belfast Telegraph

Ulster Bank future unsure as RBS chief quits

Departure unlikely to trigger rumoured sale to Irish treasury

BY DAVID ELLIOTT

The departure of Stephen Hester from the helm of RBS doesn't make a sale of Ulster Bank any more likely, according to a banking analyst.

The man who has headed up the part-privatised bank since 2008 was unable to make an "open-ended commitment" to the lender and made an announcement last night that he will step down later this year.

And in a further blow to the bank, Sky News reported that RBS will announce 2,000 job losses in its markets division, part of the investment banking arm.

A parliamentary report last week suggested that one way of allowing RBS freedom to lend more would be to hive off Ulster Bank to the Irish treasury. But even with Mr Hester leaving, such a move is unlikely according to Ian Gordon from Investec Securities in London.

"I wouldn't necessarily anticipate any change in strategy – it is not clear to me that RBS has any better options than to 'work through' an extended turnaround programme in order to seek to minimise further losses," he said.

"However, on this issue there will be fresh speculation and uncertainty – which I see as unhelpful both for Ulster Bank itself, and for the wider RBS group."

However, it was Mr Hester who declared Ulster Bank as part of RBS's "core" business during his tenure and the future of one of Northern Ireland's biggest banks will be dependent on the attitude of the incoming boss.

A core part of a bank is unlikely to be disposed of, but a non-core part of the business, which Ulster Bank easily be classified by a newcomer, could be.

Still, Mr Gordon said that such a move is unlikely, not least because of the difficulty of splitting the bank and the fact that a split is unlikely to be something the Irish government would agree with.

Finance Minister Sammy Wilson last month had also suggested that Ulster Bank should have its bad debts hived off.

Mr Gordon, in tandem with other analysts, said Mr Hester's departure is surprising, especially after a relatively successful tenure.

"(It's) surprising given recent apparent 'statements of intent' and unhelpful, both given the recently announced move of CFO Bruce van Saun and the current stage of the group's transition to recovery," Mr Gordon said.

"Hester has done an excellent job in the face of a wholly unhelpful regulatory and political backdrop – very substantially reshaping and de-risking the group.

"However, revenues, earnings and the outlook for returns remain weak.

"His departure merely adds a further unwelcome element of uncertainty at a critical time," he added.

Belfast Telegraph

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