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Ulster Bank’s UK parent is actively considering liquidating the lender in the Republic, as the challenge of reversing a struggling business with high costs and low profitability has become even greater as a result of the coronavirus crisis, according to the sources.
This puts more than 2,500 jobs and the future of its 88 branches across the country at risk.
A business downturn would take about six years and involve a series of loan portfolio sales, attracting both rival banks and non-bank lenders, industry sources said. Ulster Bank customers would also have to make alternate arrangements for their daily banking needs.
Fusion
NatWest, formerly Royal Bank of Scotland (RBS), is also weighing the merits of Ulster Bank Ireland’s merger with another lender, although this is said to be a less likely outcome.
While the 75 percent permanent government-owned TSB would be the most likely candidate for an alliance, it is understood that NatWest has not made any approach. An exit from Ulster Bank would also increase the dominance of the Bank of Ireland and AIB in the market and would be a huge blow to the competition here, given that there are only five major lenders in the market.
The strategic review, which is being closely monitored and running outside of the UK, is in an advanced stage and comes as NatWest CEO Alison Rose approaches the first anniversary in November of her time position at the British banking giant. Rose set out to restructure the group’s biggest side issue, its NatWest Markets investment banking division, last February with plans to cut the size of that business in half. It also dropped the RBS name this year.
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Division
The Edinburgh-based group formally split Ulster Bank’s operation in the Republic of Ulster Bank Northern Ireland in 2015. Sources said the Northern Ireland unit is not affected by the review.
RBS inherited Ulster Bank and an economic exposure from Celtic Tiger in 2000 through its acquisition, under then-group CEO Fred Goodwin of National Westminster. It doubled three years later in Ireland through the purchase of First Active.
Ulster Bank received a £ 15.3 billion (€ 16.4 million) RBS bailout after the 2008 crash, about a third of the money UK taxpayers injected into the entire group.
Having spent more than the last decade selling problem loans, cutting jobs and branches, the Dublin-based unit’s assets had shrunk to € 30.6 billion at the end of last year, less than half what they were in peak.
Ulster Bank’s costs have remained stubbornly high and it has consistently failed to make enough money to cover its own financing costs in recent years. Its cost-income ratio was 98.4 percent in the first half of this year.
Lost
Ulster Bank posted an operating loss of € 276 million for the first half of the year, compared to a profit of € 26 million for the same period in 2019, as it set aside € 278 million to cover potential credit losses arising from the coronavirus crisis, and as new loans fell dramatically.
Responding to analyst questions on a conference call on NatWest’s results day in August, Ms Rose said that while Ulster Bank’s growth strategy has “not changed,” Covid-19 “presents different challenges for the economy, and we will continue to consider all strategic options in relation to that business. ”
A NatWest spokesperson and Ulster Bank spokesperson declined to comment on their plans.
RBS seriously considered its future in the Republic on several occasions since the financial crisis, most recently in 2014 when it hired Morgan Stanley to discuss options, including a merger with Belgian-owned PTSB or KBC Bank Ireland and the sale of a stake. to private companies. equity investors. He decided not to take any action at that time.
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