Ulster Bank plans fresh consumer focus

Ulster Bank plans to capitalise on the bounce-back in consumer spending by making a big push into the consumer finance market through the issue of more credit cards and personal loans.

Jim Brown, the bank's chief executive, identified the consumer segment as one that the bank will concentrate on, in addition to further lending to small and medium enterprises (SMEs).

“These are areas where we could be doing more – consumer finance and SMEs. Demand is picking up in the SME market for asset-backed lending and invoice financing,” he said.

Mr Brown was speaking yesterday following the release of quarterly results to the end of September of its parent company, Royal Bank of Scotland (RBS).

RBS yesterday confirmed it has decided not to sell Ulster Bank, following a review of the bank's Irish operations by Morgan Stanley that commenced in February.

“We have a good market position and believe that, with investment, Ulster Bank can deliver attractive shareholder returns in the future,” said RBS chief executive Ross McEwan.

RBS announced yesterday that Ulster recorded an operating profit of £394 million (€502 million) in the three months, up from a loss of £133 million in the same period last year.

The bulk of the improvement was attributable to a £318 million release of impairment provisions, as property price rises and reductions in mortgage arrears reduce the amount the bank must set aside to cover future expected loan losses.

Impairment provision

Ulster’s total impairment provision now stands at €2.9 billion, after a quarterly reduction of £168 million in the amount set aside for mortgage losses, and a reduction of £130 million in the amount set aside to cover losses in corporate lending apart from commercial property.

Mr Brown said the parent company had recognised that “there are now great opportunities” in the Irish market for Ulster to capitalise on. At the beginning of the year, immediately prior to the review, RBS was thought to be considering offloading its Irish arm.

Mr Brown said RBS will now back Ulster to grow its operations across its core retail, corporate and SME banking divisions. He said the bank would aim to compete with the pillar banks, AIB and Bank of Ireland.

He reiterated the bank's opposition to proposed mortgage caps from the Central Bank that would see banks severaly restricted in the amount of mortgages they can offer to customers who don't have a deposit of at least 20 per cent of the value of the house.

“It is right that the Central Bank should keep an eye on property prices and credit. But we have real concerns about mthe impact of this on firsat-time buyers,” he said. “We will be making our submission to the Central Bank on this, and [measures to alleviate the impact] on first time buyers will be part of our recommendations.”

Commercial real estate

Mr Brown said there was a “significant increase” in corporate loan enquiries “from small and large businesses”. He said the bank would “wait and see” how the commercial real estate market develops before committing to significant commercial property lending.

He hinted, however, that in coming years the bank may try to capitalise lending opportunities created by an expected outflux of the foreign property funds that bought distressed in Ireland, and may look to sell as prices recover to crystallise their returns.

He said the bank was in dialogue with its trade unions over a range off issues, including the proposed closure of two business hubs. Pay rises for the bank’s more than 5,000 staff are also on the agenda, he said.

“Pay rises are something that we are looking at,” he said.

RBS said its profits for the third quarter were up to £1.27 billion, compared with a loss of £634 million in the same period last year. The bank also set aside £400 million to cover potential settlements that may arise from a regulatory investigation into foreign exchange rate rigging by UK banks.