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RBS’s Ulster Bank Second Quarter Impairment Charge Drops

Royal Bank of Scotland Group Plc said its Irish unit’s total impairment charge fell by 49 million pounds ($79.7 million) to 1.25 billion pounds in the second quarter from the previous three months, as defaulting loans decreased.

Dublin-based Ulster Bank Ltd.’s core business’s impairment losses fell to 269 million pounds in the second quarter from 461 million pounds, while rising to 977 million pounds from 833 million pounds in the non-core unit, Edinburgh-based RBS said in a statement today. The core unit’s operating loss narrowed to 189 million pounds from 377 million pounds in the first quarter and widened from 177 million pounds for the year-earlier period, it said.

The overall improvement “reflected a decrease in defaulting loans and a stabilization of mortgage loan loss metrics, offset by deteriorating collateral values,” RBS said.

“However, credit conditions in Ireland will remain challenging with continued downward pressure on asset values coupled with rising interest rates maintaining pressure on borrowers,” the bank said.

Rival Lloyds Banking Group Plc said yesterday that the quality of its Irish loans may worsen further, after it booked a loan loss charge of 1.78 billion pounds in Ireland in the first half. Banks operating in Ireland continue to grapple with bad-loan losses following the collapse of a real-estate bubble in 2007 and amid rising unemployment.

‘Key Risks’

“Macroeconomic conditions continue to be the key driver of Ulster Bank’s results,” RBS said. “However, further progress is being made on economic, political and regulatory reform in the Republic of Ireland and recent trends suggest a more positive medium-term outlook, although key risks remain.”

RBS appointed New Zealander Jim Brown, formerly head of the group’s Asian retail and commercial markets business, as chief executive officer of Ulster Bank in March, replacing Cormac McCarthy, who has been in the role for seven years.

Cases of home loans at least 90 days in arrears rose to 7.4 percent of Ulster Bank’s total mortgage portfolio, by volume, at the end of June, up from 6.6 percent on March 31, RBS said. “Ulster Bank Group has a number of initiatives in place aimed at increasing the level of support to customers experiencing temporary financial difficulties,” it said.

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