Ulster Bank’s withdrawal from Republic to cost €900m

UK banking giant NatWest Group signalled on Friday that it expects to incur around €900 million of withdrawal expenses and losses on loan sales under its Ulster Bank unit's withdrawal from the Republic.

"We expect to incur disposal losses through income of around €300 million in 2022 and withdrawal-related costs of around €600 million across 2022-24, with around €500 million incurred by the end of 2023," NatWest said of Ulster Bank as the group reported full-year results, a year after revealing that it was quitting the Irish market.

Still, it said that the phased withdrawal will boost the parent group’s capital reserves as it will release money that had been trapped in Ulster Bank – a factor in the decision to exit the Republic in the first place.

Ulster Bank reported a €68 million operating profit last year, compared to a €255 million loss for 2020, which had been hit by€281 million of provisions for potential loan losses, mainly stemming from the Covid-19 crisis. While the bank freed up €99million of such provisions last year, its operating expenses rose to €609 million from €548 million.

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Ulster Bank’s deposits declined by €1.4 billion over the course of last year to €18.6 billion as customers began moving accounts elsewhere. The bank plans to start writing soon to almost 1 million personal and business customers setting them deadlines of six months to switch and close their current and deposit accounts with the lender.

NatWest reached agreement last year to sell €4.1 billion of Ulster Bank corporate and commercial loans to AIB and an estimated €6.8 billion of mortgage and business loans, as well as 25 branches, to Permanent TSB.

Both deals are subject to approval from the Competition and Consumer Protection Commission (CCPC), but NatWest sees the majority of the loans transferring later this year. Ulster Bank’s deposits will take longer to shift, it said.

Meanwhile, The Irish Times reported last month that AIB, US investment powerhouse Pimco and London-based M&G Investments are vying for Ulster Bank's ¤6.5 billion of tracker mortgages.Pimco and M&G would most likely seek to refinance the loans on international bond markets, in a process known as mortgage securitisation, in the event that either secured the portfolio, according to industry observers.