THE CHIEF executive of Ulster Bank and First Active, Cormac McCarthy, is stepping down, and parent company Royal Bank of Scotland (RBS) has commenced an internal and external search for his successor.
Mr McCarthy took charge of First Active in 2000 and was appointed head of Ulster Bank after RBS acquired First Active for €887 million in 2004.
“I have decided to move on from my position as chief executive of Ulster Bank, as I believe that now is the right time for me to seek new opportunities,” he said.
His decision to leave the bank is understood to have surprised the senior management team at RBS, who offered him an alternative role within the banking group when he announced his departure.
It is understood that RBS is making no departure payment to Mr McCarthy, and that he has not yet made a decision on his future plans or whether he will continue to work in financial services.
Mr McCarthy will remain as chief executive of Ulster Bank until a successor is found and will also continue in his role as deputy chief executive of the UK retail division of RBS until early next year. He has been assisting Brian Hartzer, chief executive of the RBS division overseeing retail, wealth and Ulster Bank since he was appointed to the role last year.
Potential internal successors include Ulster Bank’s head of corporate markets Robert Gallagher and the head of its retail division, Mike Bamber, who are both long-serving executives at the bank.
RBS may alternatively move an internal candidate from within the UK operations to the Irish bank.
“Ulster Bank’s operating environment has been particularly difficult over the past two years,” said Mr Hartzer. “However, the bank has adapted its business to the new market environment and has taken major steps to move in the right direction for recovery.”
The bank reported a loss of £368 million (€414 million) for 2009 for its core business, which was created after the bank split its £55 billion loan book into a core £40 billion loan book and £15 billion non-core unit of development loans and loss-making mortgages.
About £20 billion of Ulster Bank loans were moved into the British government’s asset protection scheme, insuring against potential losses on the loans.
Responding to the financial crisis, Mr McCarthy introduced tough cost-cutting measures, including branch closures, changes to staff pensions and 1,000 job cuts from 6,000 staff.
The bank also announced the closure of First Active last year and its merger into Ulster Bank.
Irish subsidiaries of British banks have been criticised for contributing to the property bubble by offering low-cost 100 per cent mortgages. First Active was the first Irish lender to offer 100 per cent mortgages in the mainstream market, while Ulster Bank offered longer-term mortgages of up to 40 years during the boom.
New products from the bank and its British-owned rival Bank of Scotland (Ireland) increased competition, leading to a flood of lending. Ulster Bank was a heavy lender to developers, particularly at the peak of the boom, financing purchases such as Sean Dunne’s €379 million acquisition of the Jurys Ballsbridge site in Dublin.
Mr McCarthy has acknowledged that the bank made mistakes in its lending decisions.
The bank has been propped up with £3 billion from RBS, which is 84 per cent-owned by the UK taxpayer. It’s understood that further capital was pumped into the bank this year as rivals received considerably less than expected for loans sold to the National Asset Management Agency (Nama) due to the heavy fall in property values.
RBS said in May that Ulster Bank remained under pressure, with rising bad debts and slow recovery in the Irish economy.
Mr McCarthy received a pay package of £870,000 for 2008.
