Ulster Bank plans job cuts in arrears unit as profits fall

Ulster Bank plans to cut jobs in its 400-strong problem loans unit to rein in costs as banks across Europe struggle to grow income with Central Bank rates set to remain lower for longer.

"Where we will see headcount reduction and cost reduction is in arrears support," chief executive Jane Howard told The Irish Times, after the bank reported that its operating profit slumped 74 per cent in the Republic in the first half.

Ms Howard said the need to maintain current staff levels in the arrears unit will decline as Ulster Bank proceeds with its planned sale of €900 million of non-performing mortgages, announced last month, and its ongoing work on restructuring problem loans eases.

While many of the employees in the unit may find work elsewhere in Ulster Bank, filling in roles left vacant by natural attrition, overall headcount is expected to move lower, according to the chief executive. This will be accelerated as work on “remediation” of customers caught up in the tracker-mortgage scandal and other overcharging issues winds down.

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Temporary employees

Ulster Bank had an average of 2,368 staff and 247 temporary employees at the end of December, according to its latest annual report.

The bank said on Friday that operating expenses increased to €322 million in the first half from €285 million a year earlier, contributing to a slump in operating profit to €26 million from €100 million. The increase in costs was partly due to the Royal Bank of Scotland (RBS) unit setting up a standalone conduct and compliance function, according to Ms Howard.

Total income at Ulster Bank dropped to €324 million from €355 million, as its net interest margin – the difference between the average rate at which it funds itself and lend on to customers – contracted to 1.63 per cent from 1.85 per cent.

Margin decline

Some of the decline in the margin was down to the sale of €1.4 billion of non-performing loans to US investment group Cerberus late last year, said Ulster Bank chief financial officer Paul Stanley.

Meanwhile, Ulster Bank released €24 million of provisions that had previously been set aside to absorb bad loans, down from €30 million that was freed up a year earlier.

The lender, which has had to ringfence €312 million in recent years to deal with the tracker-mortgage debacle and €167 million for other overcharging and legacy issues, took an additional €20 million litigation and conduct charge in the first half of this year.

Still, Ulster Bank chief executive Jane Howard said that Ulster Bank’s underlying business remains “strong”.

“We have increased our mortgage share of drawdowns to 16.5 per cent, providing €830 million in new lending to business customers and deposits have increased by €1.8 billion,” she said. The deposits growth amounted to 9 per cent on the year.

Ulster Bank’s share of the new mortgages market was as low as 12.2 per cent early last year.