Ulster Bank swings into first quarter loss on back of €32m loan charge
Ulster Bank has reported a €25m operating loss for the first quarter of the year due to the costs of preparing itself for a potential increase in losses on bad loans arising from the economic downturn prompted by the Covid-19 outbreak.
The first quarter loss compares to a profit of €23m for the same period last year. The bank reported an impairment loss of €32m for the first three months of the year; comprising a €38m charge “reflecting a more uncertain economic outlook” and a €12m charge for “other post-model adjustments”.
Ulster said it has introduced payment breaks on mortgages and other loans; early closure options for fixed savings accounts with no penalties attached; and has increased overdraft, credit card, cash withdrawal and contactless payment limits – as well as launching a €500m support fund for businesses – as part of its Covid-19 relief programme for customers.
Ulster’s total income for the quarter amounted to €150m, €16m – or 9.6% - down on 12 months previously. This, however, reflected last year’s one-off €11m benefit following the restructure of interest rate swaps on free funds.
Ulster said gross new lending reached €700m in the quarter, but net loans to customers were down by €200m compared to the last three months of 2019.
In February, Ulster Bank refused to rule out further sales of distressed mortgage loans to vulture funds after agreeing a sale aimed at reducing the percentage of problem loans on its books to around 5%.
Ulster Bank’s parent Royal Bank of Scotland (RBS) saw its profit halved in the first quarter as it set aside £802m (€920m) to cover an expected spike in bad loans due to the coronavirus pandemic.
Despite the slide in profits, the bank’s results beat analyst expectations in part thanks to a 9% rise in income from a spike in trading in volatile markets at its previously loss-making investment bank NatWest Markets.
RBS chief executive Alison Rose said the bank was nonetheless still committed to cutting back the division and also said it would wind down digital bank Bó after it attracted just 11,000 customers since its launch in November.
Britain’s biggest four banks - RBS, HSBC, Barclays and Lloyds - have now set aside a combined £6.7bn to cover an expected rise in defaults in the fallout from the health crisis.
RBS posted pre-tax profits of £519m for the quarter, down from £1bn the previous year.
RBS remains 62% owned by UK taxpayers following its £45bn state bailout in the 2008 financial crisis.
RBS said its sharp share price fall since the outbreak of the virus meant it was unlikely the UK government would sell any of its shares soon.
