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Categorized | Banks

Ulster Bank to make €1.5bn payment to parent RBS


Posted on November 25, 2016

Ulster Bank is to make a €1.5bn payment to its parent group Royal Bank of Scotland next week, making it the first Irish bank since the financial crash to pay a dividend.

The decision by Ulster Bank to pay the dividend suggests it is confident that its turnround is on track after years of dependence on its parent and doubts about RBS’s intentions towards its troubled Irish subsidiary.

RBS poured £15bn in recapitalisation into Ulster Bank in the Republic of Ireland and Northern Ireland after it was hit by the global financial crisis and the Irish banking and property-price crash between 2008 and 2010. The operations in the Republic were split last year from those in the north, and the dividend payment is being made by the Dublin-based unit.

Gerry Mallon, chief executive of Ulster Bank in the Republic, said on Friday the dividend payment was “a very important milestone” and evidence of the bank’s “strengthening position” in the Irish banking market, which is recovering as the economy rebounds from years of austerity.

“Ulster Bank remains very well capitalised with a strong balance sheet and is well positioned to continue to support customers’ positions through our excellent products and services,” Mr Mallon said. The bank expects to have a core equity tier one ratio — a key measure of financial strength — “in excess of 24 per cent” after the dividend payment.

€64bn

gross cost to taxpayers of the Irish banking crisis

Ulster Bank’s move will be watched closely by the other Irish banks, which are keen to resume dividend payments as the banking market stabilises and mortgage lending and net interest income start to rise. The Irish banking crisis, one of the worst faced by any country, cost taxpayers a gross figure of €64bn, which is expected to work out at a net €40bn.

The main casualty was Anglo Irish Bank, which had the closest ties to Irish property developers, many of whom went bankrupt when the crisis hit. Allied Irish Banks and Bank of Ireland, the two high street stalwarts, also required state-backed recapitalisations, and the Irish state owns almost 100 per cent of Allied Irish. Ulster Bank’s recapitalisation was ultimately funded by UK taxpayers — the UK Treasury owns almost three-quarters of RBS.

Ulster Bank’s turnround is not over. It reported a fall in operating profit in the third quarter of this year compared with the same period last year of more than half, to €69m, reflecting a lower net impairment release and a one-off gain in the previous year.