Ulster Bank took a €39 million charge to in the first half of the year as it uncovered fresh "errors" in its personal and commercial loan books when working through thousands of cases where mortgage customers had been overcharged.
"We're still at the discovery stages of this," Gerry Mallon, Ulster Bank's chief executive since July 2016, said in an interview with The Irish Times on Friday after the company reported first-half results. "There could be an element of /[customer redress/] but it's much more around finding inconsistencies. A big chunk of the provisions we've made is for the project cost of fixing all of that."
He declined to give examples of potential errors, given the early stage of the project.
Ulster Bank set aside €206 million last year to cover costs associated with mortgage redress scheme for customers who were wrongly denied a European Central Bank tracker interest rate on their homes loans over the past decade. It has identified 3,500 impacted customers, up from a figure of 2,000 outlined last December.
“Within the next number of weeks, we’re going to start writing to impacted customers and engage with them in relation to compensation,” Mr Mallon said, adding that all such borrowers have been put on the correct rate.
Disclosure of a widening of the bank’s so-called “conduct and litigation charges” came as Ulster Bank reported that its adjusted operating profit fell by a third in the first half of the year €104 million, partly as the bank benefitted less from the freeing up of provisions previously set aside to cover bad loans.
The bank, which is a unit of Royal Bank of Scotland (RBS), released €13 million of such provisions in the period, compared to €34 million for the six months to the end of June 2016.
Total income fell to €341 million for the six months to the end of June from €377 million a year earlier, it said. The bank’s restructuring costs increased by €17 million, or 53 per cent, mainly down to its plans, outlined in March, to close 22 branches across the Republic involving 220 redundancies.
Half the closures were completed in the second quarter and, when completed, Ulster Bank will be left with 88 branches in the State.
“We have made significant progress in building a more sustainable bank for the future when we compare our performance to the first half 2016,” said Mr Mallon. “Customer deposit balances have increased 10.3 per cent.”
“We have reduced the risk on our loan book as evidenced by a 17.7 per cent reduction in risk weighted assets, significantly reduced the volume of under-performing loans and hence achieved a 23.1 per cent decrease in risk elements in lending (REILs) year on year.”
Still, €4 billion of the bank’s remaining €23.5 million loan book continues to be underperforming.
Meanwhile, RBS said it has selected Amsterdam as its post-Brexit European Union trading hub and was preparing to move 150 jobs to the Dutch city in the event that the UK is cut off from the single European market after the divorce. The group posted operating profit of £1.95 billion for the first six months of the year, compared to a loss of £274 million for the same period in 2016.
