Ulster Bank confirms exit from Irish market, sparking rush for loan books
The owner of Ulster Bank – the British group NatWest – has confirmed its intention to end its operations in the Republic, a move that will significantly reduce competition and jeopardize around 3,000 jobs.
NatWest made this decision after unexpectedly launching last year a reflection on the future of its 88 branches and 20 billion euros of real estate and business loans in the Republic.
The decision to leave the bank – which employs a total of 2,800 people, including people in Belfast and Edinburgh working in support operations – is unprecedented for a major player in Irish banking and will further strengthen existing lenders, in particular the dominant banks AIB and Banque, which orders well over 50% of all mortgages.
Ulster Bank must however remain open in the north.
NatWest said she had decided that Ulster Bank in the Republic would not be able to make good returns anytime soon and that she would “begin a phased out of the Republic of Ireland over the next few years”.
He revealed that Ulster recorded an operating loss of 255 million euros last year, with its impaired loan losses reaching 281 million euros, due to the Covid-19 crisis.
The decision to step down has already started a stampede for part of its loan portfolios from rival banks.
Ulster Bank has said that AIB will buy 4 billion euros of its commercial loans, with a final price agreement yet to be reached.
He also said he was in talks with Permanent TSB and other unidentified “strategic banking counterparties” over the sale of other loans.
“Our preference is to continue to focus our discussions with counterparties who can provide customers with full banking services in the Irish market,” he said in a statement which did not rule out selling loans to so-called vulture funds.
Finance Minister Paschal Donohoe said the move marked “a very difficult day for the Irish banking sector”. Other lenders would be approached to assess their interest in acquiring Ulster loans, Minister Donohoe said.
Experts said the decision to step down would mean that the cost of mortgages and small business borrowing – which are already among the highest in Europe – is unlikely to drop anytime soon.
John O’Connell, secretary general of the Financial Services Union, said it was “a very bad day”.
Pearse Doherty, finance spokesman for Sinn Féin, said it was important that Ulster Bank loans were not sold to vulture funds.
He expected other existing banks to consider purchasing the loans, but said he was “disappointed” that other lenders, except AIB, had not bid on the loan. large portfolio of commercial loans.
Economists and banking consultants have called on the government to create a state bank to fill the void left by the departure of Ulster Bank and pass legislation to cap the cost of borrowing for mortgage borrowers and businesses.
Ulster Bank chief executive Jane Howard said her parent company’s decision was “extremely disappointing”.
Ms Howard said the bank was phasing out operations and there was no reason borrowers or depositors to take action at this time. Ulster Bank holds around 22 billion euros in deposits.
She said that “it will be a difficult and worrying time for our colleagues across the bank. It can also cause customers to wonder and worry about the impact this decision might have on them and their day-to-day banking needs. “
Experts said his decision to end operations in the Republic marked a “disaster” for an already dysfunctional and high-cost banking market, and the fragmentation of the lender’s € 20.5 billion in loans between vulture funds and existing players like AIB probably only make matters worse.
The Financial Services Union said last night that it was an “incredible” act of corporate cruelty for NatWest to hold on to the future of the 2,800 Ulster Bank employees in the Republic and of the 600 people in Belfast since it emerged in September that the lender’s operations were up for review.
Public lenders AIB and Permanent TSB (PTSB) have already planned to bid for billions of euros in loans held by Ulster Bank from small and large Irish companies, while PTSB may also be interested in buying a part from the home mortgage portfolio it emerged.
A wide range of industry experts, consultants, economists and academics have told the Irish Examiner that leaving Ulster will inevitably lock in the expensive mortgage and commercial interest rates that are already among the highest in Europe.
Many experts have said the government will have to go far beyond the rhetoric of creating a “third banking force” – which was first hinted at in the 1990s – to counter the dominance of the AIB and the Bank of Ireland, and instead set up a new state bank for mortgage loans and lenders to SMEs.
Senior economist Jim Power said the departure of Ulster Bank created the second banking crisis for the government and the economy in 10 years.
The state will have to get involved in one way or another as the Irish banking market has not been functioning for a long time, he said, urging the introduction of short-term emergency legislation to cap interest rates on mortgages and small business loans. or whatever the cost, the state has to get involved, ”said Mr. Power.
The two big players already hold almost 60% of the mortgage market between them, so the remaining five players will compete for the rest, and Ulster’s 14% of home loans will be up for grabs, said Michael Dowling, one of the major mortgage brokers. .
Mr Dowling said news of the Ulster Bank review is already having a significant effect on competition and since September he has informed clients that Ulster’s competitive mortgages could fall into the hands of ‘AIB, Bank of Ireland or a vulture fund. .
“The state will have to create a state bank or come up with a deal for someone else to step in,” said John Whelan, managing partner of Linkage-Partnership. “I know they don’t like to do it, but when there has been a market failure, the government has to step in. “
Banking expert Ray Kinsella, a former professor at UCD Smurfit Business School, said he had long believed that a fresh start was needed in Ireland’s banking sector as the government had to step in to create a national bank that did not is not required to pay dividends to shareholders.
Dermott Jewell, policy adviser at the Consumers’ Association of Ireland, said attracting new players has been incredibly difficult since the financial crash.
He said there has been a market failure and the government will have to step in one way or another.
Teeling Whiskey founder John Teeling said: “An exit introduces more uncertainty in times of economic stress.”