Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, has pumped as much as 10 billion pounds ($15.7 billion) into its Irish unit since 2008 to absorb losses from the country’s real-estate bubble.
The Edinburgh-based lender last year sent as much as 4 billion pounds to Ulster Bank, a spokesman said in an e-mailed statement today. The unit’s operating loss increased to 1.02 billion pounds in 2011 from 760 million pounds in 2010.
“For all those who say investment banking is this evil thing, as a terrible activity which lost all the money, the most money that RBS lost, the least wise decisions were property lending in the U.K. and Ireland of which Ireland was the worst of all,” Chief Executive Officer Stephen Hester, 51, said on a call with analysts. RBS has pumped “too much” money into the unit, he said.
Ulster Bank, where assets doubled to 55 billion pounds in the four years through the 2007 Irish real-estate market peak, took a total 7.5 percent impairment charge against loans between 2008 and 2010, according to a report published in December by the U.K. Financial Services Authority. RBS, which bought Ulster Bank in 2000, linked its widening 2011 losses to deteriorating mortgage loans.
“The rhetoric coming from the parent company does not paint a picture of a country that has turned the financial corner,” said Colm Ryan, co-head of fixed income at Goodbody Stockbrokers in Dublin, in a note today.
The lender took a bad-loan loss charge of 570 million pounds on mortgages in 2011, rising from 294 million pounds in the previous year. Irish mortgages in arrears for more than 90 days rose stood at 9.2 percent at the end of last year, according to the central bank.
“2011 was another difficult year for the business due to the continued challenging economic environment,” RBS said. “This was reflected in the financial performance.”
Irish unemployment tripled to an average 14.2 percent last year from 4.5 percent in 2007, as the economy shrunk by about 15 percent. Home prices have dropped 47 percent since their peak in 2007, according the country’s statistics office.
Overall, Ulster Bank’s impairment losses in 2011 climbed to 1.38 billion pounds from 1.16 billion pounds. RBS also reported 2.35 billion pounds of impairment losses on loans Ulster transferred in 2009 to the group’s so-called non-core division, down from a charge of 2.73 billion pounds.
RBS’s retail and commercial business’s return on equity would have been 16.6 percent last year, had it not been for Ulster Bank, the lender said today. Including the Irish unit, the return on equity was 11.3 percent.
Ulster Bank, based in Dublin, is planning to eliminate 950 jobs, or 16 percent of its workforce, after shedding 1,000 staff in 2009.
Cormac McCarthy was replaced by Jim Brown as chief executive officer of Ulster Bank in March after seven years in the role. New Zealander Brown is a former head of the group’s Asian retail and commercial markets business.
Corporate real-estate loan losses fell to 324 million pounds from 375 million pounds. Customer deposits fell 7 percent to 21.8 billion pounds during 2011, it said.