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Ulster Bank to shave a further £0.5bn from internal 'bad bank'

By Margaret Canning

Published 31/07/2015

Ulster Bank chief executive Jim Brown
Ulster Bank chief executive Jim Brown

Ulster Bank will trim another £0.5bn from its internal 'bad bank' after another loan sale takes place, chief executive Jim Brown has said.

Mr Brown spoke as the lender revealed operating profits of £131m in Ireland over the first half of the year. There are no separate figures for Northern Ireland.

The performance for the year so far was more than double last year's £55m operating profits.

Mr Brown said: "The results show continued progress and a strong capital and funding position for Ulster Bank as it supports the economic recovery across the island of Ireland.

While the results were impacted by a weakened euro, we see an increased profit, reduced operating expenses and a continued trend of impairment releases driven by proactive debt management and the improving economic conditions."

But economist John Simpson said the result is not all good news. "When you take impairment adjustments out you are left with profits before impairments of £79m for the first half of the year - lower than one year ago, when there were profits before impairments of £112m.

"There are other weaknesses, with their loan to deposit ratio going the wrong way (from 107% to 108%), and its cost to income ratio also going the wrong way, from 73% to 79%."

In May, Royal Bank of Scotland announced the sale of Northern Ireland property loans originally worth £1.4bn - including loans taken out by Carvill Group relating to the Sirocco Works - for £205m in a deal with investment firm Cerberus.

The work of the bank's internal unit RBS Capital Resolution in Ireland was drawing to a close, Mr Brown said yesterday. "RCR [RBS Capital Resolution] has materially concluded its work in Ireland ahead of time. Since its establishment in 2014, net assets have reduced from £4.8bn to £1bn, as of June 30, 2015, with a further reduction of £0.5bn expected to complete in quarter three following the announcements earlier this month."

But Mr Simpson said the impact of such loan sales was still being felt in the wider economy. "There's still major overhang of negative assets that have been taken out and passed on to funds like Cerberus. Those borrowers are still as much in debt as they were before."

The departure of Mr Brown from the bank after four years was announced in April, with the New Zealander to leave to lead Williams & Glyn, part of Royal Bank of Scotland's retail network in Great Britain which is to be spun off before RBS can be returned to full private ownership.

The Treasury last week told the Competition & Markets Authority that RBS had not yet filed full information for the CMA to finalise a report on the impact of the spin-off. But a spokesman for Ulster Bank said the process was still on track with Williams & Glyn to be put to an IPO in 2016.

RBS posted half-year bottom line losses of £153m.

Belfast Telegraph

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