First Active acquisition, strong growth help drive bank income over €1bn

Strong growth and last year's acquisition of First Active drove total income at Ulster Bank past the €1 billion mark in 2004, figures released yesterday show.

Combined net interest and non-interest income at Ulster grew 28 per cent in 2004 to £743 sterling (€1.1 billion) from £581 million the previous year.

Ulster contributed £468 million in profits to its parent, Royal Bank of Scotland, a 32 per cent or £114 million advance on the £354 million it added to the group's earnings in 2003.

The bank said that net interest income increased by 39 per cent to £550 million, which reflected growth across all customer lending products.

Its chief executive, Mr Cormac McCarthy, said residential lending in particular delivered healthy volume increases.

Excluding First Active and stockbrokers NCB, which Ulster sold last year, the interest income increase was 14 per cent. Overall net interest margins were down slightly, reflecting growth in low-risk mortgage lending.

Non-interest income grew by 4 per cent or £8 million to £193 million. The bank said that growth in treasury fees and the sale of treasury products was partially offset by a fall in broking fees that resulted from the sale of NCB.

Excluding both the stockbroking firm and First Active, non-interest income actually increased by 6 per cent or £10 million in 2004.

Expenses rose by 21 per cent in 2004 to £235 million. However, stripping out First Active and NCB, this figure was 8 per cent.

During the year, customer numbers grew by 454,000 to 1.5 million. The bank said that 374,000 of these new customers related to First Active.

Ulster's total assets stood at £27.4 billion at the end of 2004, compared to £15.6 billion the previous year.

The balance sheet clearly shows First Active's impact on the mortgage side of the business. Home loan advances were £8.8 billion in 2004, compared with £2.8 billion the previous year.

Other advances grew 45 per cent to £12.9 billion. Deposits increased at a similar rate to £13.5 billion.

At the time that Ulster and First Active announced the takeover in 2003, they signalled that there would be job losses. Mr McCarthy said that a number of people had since left the combined operation. "It's all being done on a voluntary basis," he said. "The integration is going very well."

Royal Bank of Scotland's reported profits of £8.1 billion beat market expectations. Total income for the year was £22.75 billion.