RBS pays €1.1bn to cover Ulster Bank's bad loans

ROYAL BANK of Scotland (RBS), the part-nationalised UK bank, has injected about €1.1 billion of capital into Ulster Bank over the past seven months to allow its Irish bank to cover increasing bad loans.

The bank invested €280 million into the bank at the end of July, in addition to €500 million last February and €300 million in June.

The capital injections have been made as the bank’s losses climbed due to the rising impaired loans.

Ulster Bank made a loss of about £500 million (€585 million) in the first half of the year as bad debts surged to £641 million.

The bank has quarantined £15 billion in high-risk loans, moving them out of the existing £54 billion loan book. The transfer paves the way for the removal of most of the assets and their transfer into the UK risk insurance scheme, the British equivalent of Nama, which will address problem loans over time as markets recover.

Of the loans being transferred into a new “non-core” division, some £9 billion are loans on development land and property and £6 billion are low-rate tracker mortgages. These loans, representing just over one-quarter of the bank’s loan book, will be sold off, restructured or run down over time.

Ulster Bank has said loan losses will keep rising and that about 0.8 per cent of its loan book was impaired at the end of June, up from 0.1 per cent a year earlier.

The bank’s loan book represents just over 10 per cent of all loans outstanding in the Irish bank system, according to a report by Bloxham Stockbrokers yesterday.

The figures compiled by the firm estimate that Ulster Bank has total property investment and development loans of €17 billion, the equivalent of 10 per cent of all such loans held by 11 financial institutions across the banking system.