Loan losses at Ulster Bank fell by 80 per cent in the first quarter of this year helped by the transfer of risky assets to an internal bad bank.
According to results published by its parent Royal Bank of Scotland (RBS), impairments relating mainly to the bank's mortgage loan book fell from €292 million to €57 million this year.
This helped the lender record an operating profit of €21 million for the period, its first in five years.
“The return to profitability for the first time since Q1 2009 marked a key milestone for the bank reflecting improving trading conditions albeit volatility is still a feature of business performance,” the bank said.
Chief executive Jim Brown said Ulster Bank was focused on sustaining recovery in its core business.
He told an Oireachtas committee last month that RBS was committed to its Irish operations, having pumped about €15 billion into its troubled subsidiary during the financial crisis.
Edinburgh-based RBS is, however, considering selling a sizeable stake in Ulster Bank to a US private equity group or merging the bank with a rival, possibly Permanent TSB, in the Republic as part of a general restructuring of the group.
There are also reports it may ultimately seek to float the bank on the stock market in the long term .
Newly installed RBS chief executive Ross McEwan said today he wants to achieve economies of scale in Ireland and would be happy to work with other parties to achieve that. He said the bank would update on its plans in the summer.
In its results, Ulster Bank said its net interest margin increased by 26 basis points in the quarter to 2.36 per cent reflecting the transfer of non-performing assets to its external bad bank, RBS Capital Resolution (RCR), coupled with a continued improvement in deposit margins.
The bank said it had maintained its investment in structures to support customers in financial difficulty, which has resulted in reductions in the number of mortgage customers more than 90 days in arrears in each of the last twelve months, a trend, it claimed, was being seen elsewhere in the Irish market.
RBS said today it had trebled its profit in the first quarter, beating analysts’ expectations and handing a boost to Mr McEwan as he looks to turn around the British government-controlled bank’s fortunes.
The bank reported a net profit of £1.2 billion, up from £400 million the year before, benefiting from improved cost controls and a reduction in losses from bad loans.
The performance marked only the sixth occasion RBS has reported a quarterly profit since Britain pumped £45 billion into the bank during the 2008 financial crisis, leaving it with an 81 per cent shareholding, and contrasted with an £8.7 billion full-year loss in 2013.
The bank said it was overhauling its computer systems for NatWest and Ulster Bank as part of a wider £750 million three-year programme to improve “safety, security and resilience”.
This follows a series of IT failures across the group. A major technical glitch in 2012 significantly hampered Ulster Bank’s ability to process electronic payments, affecting the accounts of some 100,000 clients in the Republic for several weeks.
