A divorce of Ulster Bank from Royal Bank of Scotland is unlikely to take place even if the Chancellor goes ahead with a split of its parent company into a good bank and bad bank, it was claimed.
Splitting the whole of Ulster Bank from Royal Bank of Scotland was also "politically" unlikely because it would mean leaving live accounts on the island of Ireland, according to Ian Gordon of Investec.
Mr Gordon said Ulster Bank's bad debts were already reported as part of the RBS Group 'non-core' operation, "amounting to a 'self-managed' bad bank within a bank".
"In my view, admittedly subject to the extraordinary challenging economic realities – that structure is working perfectly well."
In his annual Mansion House address to bankers this week, Chancellor George Osborne said he would hold a "swift" review on whether 81% taxpayer-owned RBS should be broken up, and a decision made in the autumn.
He said the review would look at "taking the bad assets – those mistakes of the past – out of RBS".
"We'll look at a broad range of RBS's assets, but particularly assets in Ulster Bank and UK commercial real estate," he said.
Ulster Bank suffered a loss of £1bn in 2012, accounting for one fifth of RBS Group's total losses.
But Mr Gordon said the idea of splitting RBS was destructive to the value of the bank and said he was surprised that the Chancellor had aired it. And to remove Ulster Bank in its entirety would be wrong. "It will be hard to fully transfer a good bank with live current account relationships to another entity for run-off."
Politically, it would be difficult "to force a bank to initiate an exit from live relationships in the Republic and Northern Ireland".
Finance Minister Sammy Wilson welcomed the Chancellor's announcement of a review and said he had been calling for action on Ulster Bank since April.
The bank holds up to 40% of the market here and was "key" to enabling businesses to access finance.
But Mr Wilson added: "I am convinced that the approach Ulster Bank are taking is designed only to meet their own short-term needs and is damaging the longer-term interests of the local economy here."
40% - The percentage of the market held here by Ulster Bank