RBS may target ‘safe’ Irish acquisitions after sale of UK unit

The chief executive of Ulster Bank's owner, Royal Bank of Scotland, has said the group may look at "safe" Irish acquisitions again in the coming years after it offloads a UK business at the behest of the European Union.

Ross McEwan, head of RBS for the past three years, told analysts on Friday that while the group had got "lots to do to clean up" Ulster Bank, he would be "open to" carrying out an acquisition in Ireland at some point.

Mr McEwan was speaking after RBS published results for the third quarter, which showed a decline in Ulster Bank’s Republic of Ireland’s operating profit.

RBS is restricted from making acquisitions until it sells its 300-branch Williams & Glyn unit as a condition set by the EU under the bank’s £45 billion (€50 billion) bailout during the financial crisis.

Mr McEwan said RBS would miss its 2017 deadline to offload the business, which, it emerged this week, had received a takeover approach from Clydesdale Bank, which is run by former AIB chief executive David Duffy.

“We can’t do major acquisitions while we’ve got commitments through our Williams & Glyn unit,” Mr McEwan said.

“We’ve said that the Irish business is attractive. We’re getting it back into shape. At some point, it needs to start growing again safely – can I just say it again: safely? – not like we did last time.”

Highest level

The comments helped push shares in Permanent TSB up as much as 5 per cent to €2.50 during trading on Friday, marking its highest level in almost six months.

Earlier this month, Deutsche Bank analysts became the lastest to tip a tie-up between Ulster and PTSB as one of the scenarios that could play out over the coming years. KBC Ireland may also be involved in long-awaited consolidation in the sector, as banks sought ways to reduce “stubbornly high” costs and grow their loan books again after years of restructuring, Deutsche Bank said.

RBS bought Ulster Bank in 2000 as part of its acquisition of National Westminster Bank, before going on four years later to buy First Active. Ulster Bank's assets more than doubled to £70 billion in the four years before boom turned to bust in 2008. RBS had to inject £15.3 billion into the Irish business to keep it afloat during the crisis.

The UK government owns 73 per cent of RBS as a result of the group’s own taxpayer rescue.

RBS subsequently shrunk the size of Ulster Bank’s balance sheet through the sale of billions of euro of assets, with the Irish business returning to profit in 2014 as it began to release some of the provisions it had previously set aside for bad loan losses.

However, the pace at which it has been freeing up reserves has slowed down, contributing to a decline in Ulster Bank’s operating profit for the third-quarter months of the year, to £68 million, from £108 million for the same period a year earlier.

Investors

Meanwhile, Ulster Bank’s new chief executive Gerry Mallon is set to present to major RBS investors on his strategy next month for the first time since he took over in June. Executives from the group’s private banking and RBS International units will also speak at the event.

Mr Mallon told The Irish Times in an interview in August that Ulster Bank was planning, subject to regulatory approval, to hand a €1 billion-plus dividend to RBS and re-establish a regular stream of payments to its parent after years of capital moving in the opposite direction.