Bad Debt Fears Stymie Ulster Bank

The Ulster Bank has reported a massive jump in operating losses for the first half of this year.

Although its operating profit increased to £185m, that was wiped out by money set aside to cover bad loans meaning they had losses of £314m on an Ireland-wide basis.

In counterpoint, its parent company, the Royal Bank of Scotland (RBS) announced substantial pre-tax profits.

Across the UK, Royal Bank of Scotland (RBS) has seen its pre-tax profit leap to £1.14bn in the first half of the year from £15m a year earlier.

It reported an operating profit of £1.6bn compared with an operating loss of £3.4bn in 2009.

In the Irish Republic, RBS is currently seeking to take control of the iconic Arnotts Department Store, which has heavy borrowings from the bank.

However, it is mainly because its subsidiary Ulster Bank was a well-known lender to property developers that it has seen a significant deterioration in its financial performance in recent times.

Even though the day-to-day business is in profit that is all but wiped out due to the volume of property lending it is worried will have to be written off.

However, the banks said it managed to increase customer numbers by 49,000, or 3%.

Ulster Bank Chief Executive, Cormac McCarthy, said operating profit before loan losses increased by 21% to £185m.

"Reflecting the market environment in which we operate, our results include a significant charge for impairment resulting in an overall loss of £314m," he said.

Mr McCarthy said the economic backdrop and outlook remains challenging.

However, he said the bank had taken "decisive action" to adapt to the changes in the marketplace, resulting in "a significant improvement" in the performance of the underlying business.

A bullish Mr McCathy reiterated that Ulster Bank is "a core part of RBS" and said the bank, was "fully committed to supporting the needs of our 1.9 million customers across the island of Ireland."

See: RBS First Half Profits Leap By £9m

(BMcC/CD)