Ulster Bank rules out tie-up with rival

Ulster Bank has ruled out any tie-up with other financial institutions such as Permanent TSB or KBC Bank.

A potential merger between Ulster Bank, which was controlled by the UK state at the time, and PTSB, owned by the Irish government, was discussed in 2014 but a deal has been taken off the table by Gerry Mallon, Ulster Bank’s chief executive.

Mr Mallon, who joined Ulster Bank last June, said that it was not looking for a tie-up with any of its rivals.

“Our focus is completely on improving Ulster Bank and getting Ulster Bank as efficient and as effective as it possibly can be,” he said.

“We’re not at all contemplating any kind of in-market consolidation.”

The newly appointed chief executive also said that Royal Bank of Scotland, its parent company, had made it “more clear than ever” that Ulster Bank was a a core part of its post-Brexit strategy.

RBS poured £15 billion (€17.7 billion) into Ulster Bank between 2008 and 2014 to bail it out during the crisis. The Irish bank paid back a dividend of €1.5 billion late last year, becoming the first institution in the country to do so since the financial crash.

“RBS is now an institution that is primarily focused on the UK and the Republic of Ireland. So it doesn’t have a huge amount of business in the EU at the minute. Nevertheless we are its key asset in the EU,” Mr Mallon said.

“From an RBS perspective there is a lot of work going into the multiple different scenarios and the structural implications for the organisation and Ulster Bank’s participation of the role we have to play in any of those is definitely part of RBS’ scenario planning.”

Mr Mallon was speaking after the bank’s operating profit plummeted by €338 million to €24 million, in the most part due to high litigation costs.

Ulster Bank has set aside €211 million for those costs, €118 million of which has been put aside for its handling of tracker mortgage customers. The Central Bank launched an investigation in April into how Ulster Bank dealt with customers that may have been wrongly moved onto higher-interest loans.

“There is a €211 million conduct and litigation charge, that’s something which is difficult and painful for the bank but it is the right thing to do,” he said.

Mr Mallon said that 1,885 customer accounts had been restored to a tracker rate and that he expects more impacted customers to be identified.

The bank reported a surge in mortgage drawdowns, up 48 per cent to over €1 billion last year. Its share of the new mortgage lending market has also risen from 14.5 per cent to 18.5 per cent.

Income from the institution’s core business divisions has increased with underlying expenses and problem loans both falling. Net interest margin rose by 5 basis points to 1.62 per cent. Total risk-weighted assets fell to €21.1 billion from €26.4 billion.

The bank’s adjusted operating profit, when restructuring and litigation costs are taken out, slipped 23 per cent to €280 million, its third year of profit after years of deficits.

Mr Mallon, who spent eight years at the helm of Dankse Bank in Northern Ireland, also said the bank is writing to over 2,000 commercial customers to say that they have the opportunity to engage with RBS’ global restructuring group (GRG).

GRG was set up to restore companies to financial health but faced criticism both in the UK and in Ireland. Pearse Doherty, the finance spokesman for Sinn Féin, referred to the GRG as “death row” for struggling companies.

The Ulster Bank boss also said that the Irish mortgage market has significant room to grow before it reaches a normal level.

“At a macro level the Irish mortgage market is still a long way behind where it would have been at peak levels and a very long way behind where it would be in a normalised environment,” he said.