Ulster Bank has reported a loss of £566 million (€656 million) for the first half of the year - £252 million more than the same period last year - despite decreasing levels of bad loans in the UK-owned subsidiary over the six-month period.
Ulster Bank's owner, Royal Bank of Scotland, only publishes operating performance for the core part of the Irish bank which has loans of £37.4 billion. A further £15.3 billion in loans in the non-core is being run down over time.
The bank said that the combined bad loan charge in the core and non-core divisions declined £49 million to £1.25 billion in the second quarter of the year.
Ulster Bank posted a loss of £189 million in the second quarter compared with a £377 million loss for the first quarter of the year.
Bad debts within both Ulster Bank divisions totalling £2.5 billion in the first half represent 62 per cent of the impairment charge across the RBS group.
Impairment losses in Ulster Bank's non-core division account for almost three quarters of the bad debt charge across the non-core division of RBS.
The impairment charge in Ulster Bank's core business fell to £269 million in the second quarter of the year compared with £461 million in the first quarter.
This arose from a “recalibration of credit metrics in relation to the mortgage portfolio”, RBS said.
“Credit conditions in Ireland will remain challenging with continued downward pressure on asset values coupled with rising interest rates maintaining pressure on borrowers,” the bank said.
Bad loans increased in the non-core division as a result of declining land values and “impairments relating to a small number of large corporates”.
Impairments on the £9 billion in property development loans in the non-core division almost doubled to £1.3 billion in the first half on the same period last year.
The bank's figures showed increasing financial distress among mortgage customers at Ulster Bank, one of the top mortgage lenders during the boom.
Bad debts in Ulster Bank's mortgage book jumped to 2.9 per cent of loans at the end of June 2011 from 0.9 per cent a year earlier.
The number of customers falling into arrears of 90 days or more on mortgages rose to 7.4 per cent of loans at June 30th from 6.6 per cent three months earlier.
“Further progress is being made on economic, political and regulatory reform in the Republic of Ireland and recent trends suggest a more positive medium-term outlook, although key risks remain,” said RBS.
The bank said that the bank had agreed forbearance measures on £1.8 billion of £21.8 billion in mortgages at Ulster Bank at the end of June, compared with £1.2 billion six months earlier.
Some 78 per cent of these loans are in the performing book.
RBS made a loss of £678 million in the second quarter of the year on the back of the bad loans at Ulster Bank and after taking losses on Greek government bonds.
The loss compared with a profit of £1.17 billion a year earlier.
The bank, which is 83 per cent owned by the UK government, wrote off £733 million to cover expected losses on £1.145 billion worth of Greek bonds.
