RBS Irish Unit to Start Returning Capital to Parent This Year

  • Ulster Bank Ireland is `significantly overcapitalized'
  • Release of unneeded provisions fuels 262 million-pound profit

Royal Bank of Scotland Group Plc’s Irish bank plans to start returning a “significant” amount of capital to its parent company this year, following multiple bailouts during the financial crisis, according to the unit’s top executive.

Ulster Bank’s Republic of Ireland division aims to complete a series of one-time returns of capital by next year, Paul Stanley, interim chief executive officer of the unit, said in a phone interview. Any paybacks would be subject to regulatory approval, he said.

The Irish division “is significantly overcapitalized, and has been through 2015,” said Stanley. He declined to provide figures or say how the capital return might work, other than it would not be through “standard” dividends.

Ulster Bank’s Republic of Ireland arm posted 262 million pounds in operating income last year, having returned to profit in 2014 for the first time since the 2008 real-estate crash. Earnings were boosted as the bank released 141 million pounds of provisions previously set aside for bad loans. Ulster Bank was split geographically into Northern Ireland and Republic of Ireland divisions last year.

RBS had to inject 15.3 billion pounds ($21.4 billion) into Ulster Bank during Ireland’s real-estate collapse. However, the division is now a bright spot for its parent company: RBS reported a 1.98 billion-pound 2015 loss on Friday, and said it will take longer than planned to resume paying dividends.

RBS Chief Financial Officer Ewen Stevenson said on Friday that the Irish unit’s incoming CEO, Gerry Mallon, will have a “very clear mandate” to cut costs and increase revenue. The division’s cost-income ratio last year was 78 percent, compared with a medium-term target of 50 percent set in 2013.

The number of staff in the Republic of Ireland fell by about 250 to 2,500 last year. “We continue to look to generate efficiencies,” said Stanley, adding that the future focus will be on growing income. “You can cut costs to where you have no business.”

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