RBS Pledges to Stay In Ireland as Loss Widens On Bad Bank

Royal Bank of Scotland Group Plc said it’s staying in Ireland, as Ulster Bank operating losses widened in 2013 due to a charge for real estate assets moved to an internal bad bank.

Operating losses at Ulster Bank increased to 1.46 billion pounds ($2.43 billion) from 1.04 billion pounds a year earlier, Edinburgh-based RBS said in a statement today. Loan losses rose to 1.77 billion pounds from 1.36 billion pounds, driven by a 892 million-pound charge relating to the setting up of RBS Capital Resolution, an internal bad bank.

“We’ve been here for 178 years and we’re here to stay,” Jim Brown, Ulster Bank chief executive officer, said in an interview with Dublin-based RTE Radio. He said jobs will be at risk in the coming years as it winds down assets in its bad bank and mortgage arrears ease.

RBS was forced to pump 14.3 billion pounds into Ulster Bank from 2009 to 2012 after the worst real estate bust in Western Europe. Now, signs of improvement in Ireland are starting to emerge, with the lender saying that arrears cases of more than 90 days have dropped every month since March.

“While underlying trends in the core Ulster Bank continue to recover, we would not be surprised to see the bank seek to merge with other small players in the coming year as it seeks scale,” said Ciaran Callaghan, an analyst with Dublin-based Merrion Capital.

Mortgage lender Permanent TSB Group Holdings Plc (IPM) is one merger candidate, Callaghan said. Ulster’s mortgage losses fell 64 percent to 235 million pounds in 2013, the bank said today.

Ulster Bank’s losses excluded a 3 billion-pound loan impairment charge in its non-core unit, which was set up in 2009 to house loans it planned to run down.

Shifting Assets

While Ulster is shifting assets to an internal bad bank, other lenders are opting to leave Ireland altogether. Lloyds Banking Group Plc (LLOY) was the first to exit, in 2010, after channeling 8 billion euros ($10.9 billion) into its Dublin-based division. Dutch lender RaboBank Group’s ACCBank plans to hand back its license this year, while Danske Bank A/S, Denmark’s largest lender, is getting out of Irish consumer and business banking.

“Staff as well as customers want to know what kind of Ulster Bank will exist in the future and what, if any, changes are likely to branches, structures and jobs,” Larry Broderick, Irish Bank Officials Association general secretary, said in a statement.

The bank said in July it will cut as many as 1,800 jobs, or almost a third of its workforce, by the end of 2016, through a combination of attrition and a program announced in 2012 to lay off 950 staff. It also outlined plans to close about 30 percent its 238 branches.

Brown told U.K. lawmakers on Jan. 29 that Ulster Bank is on track to return to profit during 2014, having posted losses since 2008. RBS said today plans to integrate Ulster Bank’s Northern Irish personal and business banking operations closer to the U.K.

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

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

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