Ulster Bank bad debt charges reach £654m

FURTHER LOSSES on Ulster Bank’s £19.8 billion (€24 billion) mortgage portfolio helped push charges for bad debts in the first quarter of 2012 to £654 million, 15 per cent higher than the previous quarter.

The bank’s UK parent Royal Bank of Scotland said credit conditions in Ireland “remain challenging” as Ulster Bank reported an operating loss of £310 million on its “core” £34 billion loan book.

The bank made an operating profit of £84 million before taking an impairment charge of £394 million for troubled loans in its core division. A further charge of £264 million on noncore loans of £14 billion pushed the total charge to £654 million, down from the £1.3 billion in the first quarter of 2011.

“Ulster Bank still faces exceedingly difficult market conditions,” RBS said in the quarterly results.

The UK said it had injected as much as £770 million into Ulster Bank, on top of the £10 billion pumped into the Irish unit since 2008, bringing the total bailout to almost €13 billion.

Ulster Bank was once again the worst performing division at RBS in the first quarter of the year.

The overall charge at the Irish bank, the third largest retail bank in Ireland, amounts to more than half the RBS impairment charge, even though it accounts for only 10 per cent of total loans at RBS.

“We have pretty much put aside the money for our [Irish] property development book that’s in the legacy asset division and that just becomes a long-term workout,” RBS finance director Bruce Van Saun said. “Hopefully, by the second half of the year things will start to look a little brighter.”

Bad mortgages and commercial property loans drove the impairment charge as “high unemployment, austerity measures and economic uncertainty have reduced incomes and, together with limited liquidity, have depressed the property market,” RBS said.

Mortgages account for £215 million, or 55 per cent, of the charge in the first quarter, compared with 41 per cent in the previous quarter.

Ulster Bank, one of the top three Irish mortgage lenders during the boom, wrote off £6 million of mortgage debt in the first quarter of the year compared with £7 million in the previous quarter.

Some £7.5 billion of mortgages at Ulster Bank, or 37 per cent of the portfolio, had a loan-to-value ratio of more than 130 per cent, owing to falls in house prices.

The bank repossessed 46 properties during the first quarter, half of which were voluntarily surrendered or abandoned, compared with 37 in the previous quarter.

Ulster Bank had agreed forbearance measures with customers in financial difficulty on mortgages of £1.9 billion, representing 9.4 per cent of its book by the end of March, compared with 9.1 per cent of £1.8 billion three months earlier. “We continue to work with our customers who are in financial difficulty,” said Ulster Bank.

The headcount at the Irish bank, which announced 950 redundancies in January, stood at 4,500 at the end of March, which was 300 higher than three months earlier. RBS, which is 82 per cent state-owned, said it will pay back shortly the last of its emergency aid from the UK government and resume paying dividends on preference shares.

Operating profit rose 4 per cent to £1.18 billion on a year earlier.