Ulster Bank main reason for £180m loan loss

Loan losses at the Ulster Bank Group are “predominately” responsible for a rise of £180 million in impairments in RBS’s Europe and the Middle East banking divisions.

This division reported an operating loss of £91 million for the period, compared to a profit of £108 million in 2008, with bad loans at Ulster Bank and First Active the main cause. This brought the total level of impairments for the division to £221 million, with RBS's Irish operations the primary cause.

Ulster Bank and First Active are owned by Royal Bank of Scotland and are included in its results for the bank's retail and commercial banking divisions for Europe and the Middle East.

This division reported an operating loss of £91 million for the period, compared to a profit of £108 million in 2008.

Income in this division fell 5 per cent to £358 million, or 17 per cent at constant currency and reflected “the impact of lower interest rates on deposit margins, and lower volumes in both retail and commercial franchise.”

Cormac McCarthy, chief executive, Ulster Bank said: “Our results for the first quarter of 2009 reflect the unprecedented downturn in the Irish economy. Market conditions are difficult and, we expect, will remain so for some time.

“Our underlying business remains strong and we are a core part of the RBS group. We remain focused on adapting our business to deal with prevailing local and global market conditions and on supporting our customers through these challenging times.”

Ulster Bank and First Active are among the group of Irish mortgage providers that have decided not to pass on yesterday's 0.25 per cent rate cut by the European Central Bank to variable mortgage holders. The decision was taken "in consideration of the needs of savers as well as borrowers", the lenders said.

Loans and advances were £2 billion lower in the first quarter with deposits £4.1 billion lower, primarily due to a reduction in wholesale markets. Retail deposits were broadly flat.

Royal Bank of Scotland, the biggest bank owned by the British government, posted a first- quarter loss as bad loans and credit market writedowns reached £4.9 billion.

The bank said its net loss was £857 million, compared with a profit of £245 million in the same period a year earlier, the Edinburgh-based bank said today in a statement.

At 9.45am shares in RBS were up 10.8 per cent.

Chief executive Stephen Hester has cut more than 11,700 jobs, ousted directors and sold assets to restore profitability at the bank, which fell into government control after it posted the biggest loss in UK corporate history last year.

“The results demonstrate the challenging conditions we face and that we expect to continue,” Mr Hester said in the statement.

“We are fundamentally changing both the shape of the business and the way that we do it.”

Revenue rose 26 percent to 9.7 billion pounds, lifted by “exceptional” growth at RBS’s global banking and markets securities unit, the company said.

The volume of UK checking accounts rose 3 per cent to 12.5 million and savings accounts increased 15 per cent to 9.2 million, the bank said.

RBS this week named Brian Hartzer (42) to lead its UK retail, wealth and Ulster banking units.

Additional reporting Bloomberg