ULSTER BANK, part of the UK- owned Royal Bank of Scotland (RBS), has announced plans to cut 250 more jobs after making a loss of about £500 million (€585 million) in the first half of the year.

The bank would seek further voluntary redundancies in addition to the 750 job cuts announced last January with the closure of First Active and its merger with Ulster Bank after 1,500 people applied for the redundancy plan.

Bad debts at the bank surged to £641 million (€750 million) in the first half of the year. Ulster Bank has separated £15 billion in higher risk loans out of its existing £54 billion loan book in a “warehousing” move to remove troubled assets.

A large part of this new division, now described as “non-core” by the bank, will be dealt with under the UK government’s risk insurance scheme, where losses on toxic loans will be written off over time.

The new division comprises £9 billion in loans on development land and property, and £6 billion on low-rate tracker mortgages. The loans will be sold off, restructured or run down over time.

Cormac McCarthy, chief executive of Ulster Bank, said that the new “non-core” division was a precursor to what the Irish banks would create under the Nama plan to remove toxic loans in the sector.

He said the aim was to “create visibility in the marketplace” on the areas of the business the bank intended to focus on in future.

It was “too early to tell” whether Ulster Bank would apply to participate in Nama, said Mr McCarthy.

The Government has left the door open for foreign-owned banks in Ireland to join Nama.

“We will have a close look at it and we will have to consider the implications, but it is a very long shot that we will be in it,” he said.

RBS said in its half-year financial report that it intended to “clarify the eligibility of certain Ulster Bank assets” for Nama.

Releasing its half-year figures yesterday, Ulster Bank, which posted its results in sterling with those of its parent bank, only reported operating losses on its “core” business, comprising the remaining £39 billion loan book.

It posted an operating loss of £8 million in the six months after loan losses surged to £157 million. This compared with a profit of £172 million for the same period last year.

Some £107 million of the loan losses related to corporate loans.

The bank’s total loan losses rose to £641 million when bad debts in the “non-core” unit are included., leaving a loss of about £500 million for the six-month period.

The bad debt charge totalled 2.15 per cent of loans across the bank at June 30th, up from 0.8 per cent at the end of last year.

Mr McCarthy said there may be further loan losses over the next 18 months. “We are not through this yet,” he said. “There is more to come.” He conceded that Ulster Bank had made mistakes in lending during the boom years.

“As an industry we made mistakes and we are in the industry. It is about getting on with the future now and dealing with it.”

Mr McCarthy said that the new round of job losses would be in the bank’s capital markets and central services divisions which are based in Dublin, reducing the bank’s overall staff numbers to 5,000.

Mr McCarthy said the initial 750 cuts were in retail business and that further cuts were sought after the first round of redundancies was over-subscribed.

Deposits at Ulster Bank fell to £18.9 billion at June 30th from £22.9 billion a year earlier, driving up the loans-to-deposits ratio to 206 per cent from 161 per cent.

Mr McCarthy blamed the Government guarantee for domestic lenders and negative publicity surrounding the Irish economy in the first quarter of the year for the fall.

Ulster Bank is “not likely” to increase standard variable mortgage rates, he said, pointing out that the bank’s standard variable rate was higher than Permanent TSB which recently raised its rate.

The Irish Bank Officials’ Association (IBOA) said the further job cuts at Ulster Bank were “profoundly disappointing” given that the earlier lay-offs were not yet finalised. IBOA general secretary Larry Broderick warned earlier this week that up to 5,000 jobs in the banking sector could be at risk due to consolidation in the sector following loan transfers to Nama.