Ulster Bank returns to profit as exit plans advance
Ulster Bank recorded an operating profit of 13 million euros in the Republic in the first quarter of the year by freeing up money that was previously set aside to cover bad debts, while its parent company Briton said she plans to shut down the unit over the next few years remain “on track”.
The Dublin-based lender’s loan portfolio fell from € 200m to € 19.8bn in the first three months of the year as loan repayments exceeded new loans, while deposits fell from 100 million euros to 21.7 billion euros, as a result of reduced balances.
The numbers were included in the first quarter earnings report of NatWest Group, the parent company of Ulster Bank.
Operating profit compared to a loss of 25 million euros for the first quarter of last year, when Ulster Bank took an initial charge of 32 million euros to cover an expected increase in losses on bad loans as a result of the Covid-19 crisis. In total, provisions for loan losses amounted to 281 million euros last year, net of 3 million euros of these reserves having been released in the last quarter of 2020.
The bank took back another 14 million euros of these provisions in the first three months of this year, citing “improvements in the mortgage portfolio”.
The publications “clearly show a stabilization” of the macroeconomic environment, said Eamonn Hughes, analyst at Goodbody Stockbrokers.
The level of distress on Irish mortgage portfolios has so far been far lower than feared at the start of the pandemic, with home loan portfolios helped by the fact that many lower paid workers most affected by closures in certain sectors of the economy – including leisure and non-essential retail – are less likely to have mortgages. Government aid for wages and Covid-19 unemployment benefits also helped.
NatWest confirmed in February that it would proceed with a “phasing out of the Republic of Ireland over the next few years, which will be managed in an orderly and thoughtful manner,” as the unit was unlikely to be able to generate sufficient profits for the foreseeable future. The banking activities of Ulster Bank Limited in Northern Ireland are not affected.
NatWest plans to sell approximately € 4 billion in performing commercial loans to AIB and is in talks with Permanent TSB (PTSB) and other strategic banking companies about their potential interest in purchasing “certain assets, liabilities and retail operations. and SMEs ”. Analysts expect PTSB to eventually acquire around € 9 billion in mortgages and small business loans from Ulster Bank and some of the outgoing bank’s branches.
“Plans remain on track to phase out the Republic of Ireland over the next few years,” NatWest said Thursday. “Ulster Bank RoI remains open for business and continues to support its clients through this transition and the challenges of Covid-19.”
Last month Ulster Bank was fined a record 37.8 million euros by the Central Bank for its role in the state mortgage scandal, which saw the lender strategizing ” deliberate ”to turn borrowers away from cheap mortgages during the financial crisis and only make things right for those who complained.
Borrowers lost 43 properties due to overcharging as they were denied their right to a low-cost mortgage tied to the European Central Bank’s prime rate, according to the Central Bank.
“The fine was largely covered by existing provisions,” NatWest said Thursday. Ulster Bank has made around € 300 million in provisions in recent years to cover costs related to the tracker fiasco, including refunds, indemnities, administrative costs and fines.
NatWest Group posted a pre-tax profit of 946 million pounds sterling (1.09 billion euros) for the first quarter of the year after freeing up cash it had set aside to cover bad debts due to the pandemic. The result exceeded an average analysts forecast of £ 536million and the reported £ 519million surplus for the corresponding period last year.