RBS’s Ulster Bank Operating Loss Doubles as Loan Losses Soar

Royal Bank of Scotland Group Plc’s Irish unit’s operating loss doubled last year as losses from souring real estate loans surged.

Ulster Bank Ltd.’s operating loss widened to 761 million pounds in 2010 from 368 million pounds the previous year, Edinburgh-based RBS said in a statement today. Impairment losses climbed to 1.16 billion pounds in 2010 from 649 million pounds. RBS also reported 2.73 billion pounds of impairment losses on loans Ulster Bank transferred to the group’s non-core division in 2009, it said.

RBS acquired Ulster Bank in 2000 as part of its purchase of National Westminster Bank Plc. RBS expanded in Ireland in 2003 through the acquisition of First Active Plc, the country’s oldest building society. The Edinburgh-based lender injected almost 3 billion pounds into Ulster Bank between 2008 and 2009 as Irish lenders grappled with soaring bad loan losses following the implosion of a domestic real-estate bubble.

Ulster Bank’s performance should improve “somewhat” in the second half, although “we remain cautious” on the Irish economic outlook, RBS said in today’s statement.

The lender is still looking for a Chief Executive Officer to replace Cormac McCarthy, who said in July he would step down.

Ulster Bank transferred 16.7 billion pounds of its loan book to RBS’s non-core unit in 2009, leaving it with 39.7 billion pounds of loans.

About 6 percent of Ulster Bank’s 21.1 billion pounds of mortgages were in arrears of more than three months at the end of 2010, almost double the proportion the previous year.

Ulster Bank agreed “forbearance arrangements” on 5.8 percent its mortgages at the end of December as it increase “the level of support to customers experiencing temporary financial difficulties,” RBS said.

Ulster Bank’s loan-to-deposit ratio fell to 152 percent at the end of the year from 177 percent the previous year, it said. That was helped by 1.7 billion-euro ($2.3 billion) jump in customer deposits, according to analysts including Fergal O’Leary and Jim Ryan of Glas Securities.

Ulster Bank was “a clear beneficiary of the migration of deposits from Irish government-guaranteed banks,” the analysts wrote in a note to clients today.

To contact the reporter on this story: Joe Brennan at jbrennan29@bloomberg.net;

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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