Ulster Bank aims to cut soured loans by further sale

Ulster Bank plans to reduce by a significant amount its elevated level of non-performing mortgages through another loans sale this year.

The bank said that it will continue to work through and resolve its mortgage arrears cases, but that plans to complete its second sale of loans in two years could be affected by political considerations.

The lender currently has about €2.8bn in non-performing loans on its books, which account for 11.3% of its gross loan book.

Jane Howard, its new chief executive in the Republic, said that the bank expects that its share of non-performing loans will be cut towards the 5% level by the end of the year.

That goal would be achieved by working through cases on a customer-by-customer basis and through a sale of non-performing loans, she said after the bank announced its 2018 results.

Irish lenders and banks in southern Europe face particular pressure from the ECB to reduce the levels of non-performing loans on their books, the legacy of the property and banking crash.

Last year, Ulster Bank sold loans valued in gross terms at €900m. Any further sale to a vulture fund will involve personal mortgages. However, the timing of its next sale planned for the third or fourth quarter could be affected by the progress of new legislation over the sale of distressed home loans, the bank said.

Sinn Féin’s “No Consent, No Sale” bill, which focuses on customers’ rights in sales of mortgage loans by the main banks to vulture funds, has made progress through the Dáil.

Speaking after Ulster Bank in the Republic unveiled a“modest” operating profit of €15m for 2018, Ms Howard, who joined the bank from its parent RBS late last year, said the uncertainty over Brexit was weighing on a number of customers.

Along with other banks, the bank had seen that SMEs involved in import and export businesses had delayed their investment plans and had drawn down cash reserves rather than committing to new borrowings.

She said the bank was helping to explain to customers the supports available to prepare for Brexit, but added that the consensus forecasts were for the economy in the Republic to continue to expand even under a hard Brexit. SMEs face other problems, she said, including recruiting all types of skilled and unskilled workers.

In the UK, its parent RBS said it had seen a slowdown in investment plans by large companies because of Brexit uncertainty. Ulster Bank said cutting costs “remains a priority” but said it sees “opportunities” to save costs as it reduces the level of soured loans on its books.

The bank employs around 3,000 people in the Republic and has 88 branches, but, as with other Irish lenders, many employees are involved in working through mortgage and corporate loan arrears cases.

Its direct staff costs in the Republic amounted to about €230m last year.

It plans to invest in branches and online services. Ulster is moving from its head office in Dublin’s St George’s Quay into College Green this year and is investing in its centre at Leopardstown in south Dublin.

Ms Howard said that the bank had no plans to buy rival Permanent TSB.

There was “no mandate to acquire or merge with Permanent TSB or any other bank,” she said, when asked about renewed comment over such a deal.

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