Irish
Ulster Bank reports 2012 loss of £1.04bn; Royal Bank of Scotland loses £5.2bn
By Finfacts Team
Feb 28, 2013 - 10:01 AM

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Ulster Bank today reported an operating loss of £1.04bn sterling for 2012 compared to operating losses of £984m in 2011. The bank said that while the challenging economic environment across the island of Ireland had a significant impact on its financial performance for 2012, there were some emerging signs of improvement during the latter part of the year, most notably in the availability of institutional funding, some stabilisation of residential property prices and ''modest'' economic growth.

Provisions for bad debts fell to £1.364bn from £1.384 bn.

Operating profit, before impairment losses was £324m, down from the £400m reported in 2011. Net interest income also dropped to £649m from £736m, while total income for the year dropped to £845m from £947m.

Royal Bank of Scotland, Ulster Bank's parent which is 82% owned by the British government, reported pre-tax losses of £5.2bn sterling compared to losses of £1.2 bn in 2011.

The bank said it had to take a charge of £4.6bn for losses on the value of its own debt.

RBS said it made an operating profit of £3.5bn last year, up from £1.8bn the year before and the highest since its bailout in 2008.

Eamonn Hughes and Colm Foley of Goodbody commented: "RBS has reported FY12 results this morning. We are more interested in the comments on the Irish operations, Ulster Bank.

Ulster Bank has reported a loss of £1,04bn for the year, which is 6% larger than the 2011 loss. In Q4, the operating loss at £243m was flat on Q3. For the full year, income was down c.£100m yoy though net interest income in Q4 was relatively flat on the prior quarter, as were margins (at 1.93%). Costs were c.5% lower in the year (+10% in Q4). Impairment losses in the year at £1.36bn were flat yoy (£1,384m) and the likely main focal point in the results. However, the credit charge in the core Ulster Bank business must be aggregated with the assets in the non-core division to get the full picture.

Non-core impairments are down to €983m in FY12 from €2,35bn in FY11, with the improving trend evident in the prior quarters. However, in Q4, the non-core impairment charge increased strongly on Q3 (relating to development property), driving a 605pbs annualised Q4 aggregated credit charge versus 4.4% in the prior two quarters. The mortgage impairment charge eased back from 3.3% in Q3 to 2.8% in Q4 leaving it at 3.4% for the full year. In the outlook, the bank mentions that it anticipates gently declining impairments within Ulster Bank in the core business though in the non-core business, losses are expected to decline somewhat compared with 2012.

The numbers for Ulster Bank continue to highlight the difficult operating environment in the Irish market. Whilst the impairment rate in mortgages improved in Q4 over Q3, we note the uptick in other corporate lending (4% to 5% in Q4) and property (including non-core, from 6.3% to 10.9%). We await BOI results on Monday, where we anticipate a €1.6bn net loss."

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