Loan losses at Ulster Bank rose to almost £500 million in the first six months of 2010 as parent group Royal Bank of Scotland reported its first profit since 2007.
Impairments rose to £499 million in the six months to June 30th 2010, compared with a loss of £157 million in the same period last year. Loan losses for the second quarter were £281 million, the bank said today.
Before provisions, the bank made a profit of £185 million in the first half of the year, and £104 million for the three-month period. However, the impairment provisions reversed these gains into losses of £314 million and £177 million.
Speakig on RTÉ's Morning Ireland today, chief executive Cormac McCarthy said Ulster Bank was being hit by the downturn in the Irish economy.
"What you're seeing in our numbers is the impact of the deterioration in the economy," he said. "We continue to see that working through."
Ulster Bank, which is owned by Royal Bank of Scotland, has a residential mortgage portfolio totalling £20.5 billion, with 90 per cent of it in the Republic of Ireland. The rate of Irish mortgages in arrears rose to 4.8 per cent over the six months, rising from 3.3 per cent in December 2009.
"The increase in the percentage of the portfolio in negative equity is driven by continuing house price
depreciation in the Republic of Ireland in the first half of the year," the bank said in a statement.
"The arrears rate continues to increase owing to the continued challenging economic environment."
The impairment charge for this sector to June 2010 was £109 million, more than double the £43 million recorded in the first half of last year. There were 43 repossessions over the first six months of 2010, with the bank stating that 72 per cent were voluntary.
On a group basis, Royal Bank of Scotland's net income was £9 million in the first six months of the year, compared with a loss of £1.04 billion a year earlier. That beat analyst expectations of £47 million loss for the period.
"The rebuilding of RBS is a marathon and not a sprint," chief executive Stephen Hester said in a statement. "There is, of course, plenty left to do."
The bank today announced it would sell its credit- card payment processing unit to Advent International and Bain Capital for £1.7 billion). RBS may receive a further £200 million if the buyers' returns hit certain targets. RBS will keep a 20 per cent stake.
It will also book a gain from the sale of about £850 million after goodwill, separation and transaction costs, the bank said.
RBS is being forced to dispose of the unit to comply with European Union state-aid rules after taking £45.5 billion in a taxpayer-funded rescue during the financial crisis. The bank announced this week the sale of 318 branches to Banco Santander SA to comply with the ruling, and must also dispose of its insurance division.
Additional reporting: Bloomberg