RBS reports half year profit; Ulster Bank posts reduced loss
By Finfacts Team
Aug 2, 2013 - 11:30 AM

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RBS (Royal Bank of Scotland), which is 81% owned by the British government, today reported a half year profit while its Irish unit, Ulster Bank, posted a reduced loss

Ulster Bank reported a first half loss of €387m, down from €675m the same time last year.

Bad debt charges in the six-month period dropped by 30% to €591m from €782m, which the bank said was due to lower mortgage impairments.

Ulster Bank said that the number of customers in arrears for over 90 days declined in the second quarter of the year from the first, the first quarterly fall since June 2008. However, the bank added that it continues to see "large" numbers of customers who are not engaging with it.

Meanwhile, the incoming chief executive of Royal Bank of Scotland will take no bonus for his work in the role this year or 2014.

Ross McEwan, 56, a native of New Zealand, who is currently head of the bank's retail unit, will take up the position in October with a £1m salary.

The announcement came as RBS posted pre-tax profits of £1.4bn in the first half of the year. This compared with a loss of £1.7bn the year before.

The bank said McEwan, who joined RBS from Commonwealth Bank of Australia in 2012, would not take a bonus for 2014 or for the remainder of 2013. Instead of a pension he is set to receive a cash sum each year equivalent to 35% of his salary.

Chancellor George Osborne welcomed the appointment, saying McEwan had impressed with his vision of RBS as a strong, UK-centred corporate bank.

In the first half of the year the bank reported a group operating profit of £1.7bn, up 5% from the first half of 2012. However, RBS was forced to set aside another £185m to compensate customers for the mis-selling of payment protection insurance, taking the bill for mis-selling to £2.4bn.

Eamonn Hughes and Colm Foley of Goodbody commented - - "RBS has reported H113 results this morning. We are more interested in the comments on the Irish operations, Ulster Bank.

Ulster Bank has reported an operating loss of £329m for the HY period, which is 41% lower than the H112 loss. In Q2, the operating loss at £165m was flat on Q1. Income was up £30m on H112, with non-interest income accounting for the bulk of this improvement. Net interest income in Q2 was flat on the prior quarter, as were margins (at 1.85%). Costs were 7% higher in the quarter due to investment and change spend.

In the core business impairment losses in the quarter, at £263m, were down yoy (£323m) 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 €53m in Q213 from €242bn in Q113. This drives a 4.1% annualised Q2 aggregated credit charge versus 4.19% in Q1. The mortgage impairment charge of £91m was flat on Q1 equating to a 1.84% annualised charge.

In the outlook, the bank mentions a stabilisation in the macroeconomic environment in Ireland, while impairments are expected to continue to gently decline as the macroeconomic picture in Ireland continues to improve. The numbers for Ulster Bank continue to highlight the difficult operating environment in the Irish market, but impairment charges are reducing."

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