Ulster Bank has reported an operating loss of €441m for the first three months of 2011, mainly due to an increase in bad loans.
In a trading update, it said that impairment losses increased from €438m to €540m in the first quarter. The bank said the tough economic climate here was continuing to affect it.
Its parent bank, Royal Bank of Scotland, said its exposure to Ireland hit its earnings overall, and RBS said it expects charges for bad debts from Ireland to remain high in the next three months.
Ulster Bank said that the credit quality of customers has continued to decline in line with market trends. Higher levels of defaulting on loans were also seen in the corporate investment and SME sectors.
The bank said that over 4,000 mortgage arrangements were put in place for customers having problems meeting their repayments. These include temporary reductions to repayments or loan extensions when appropriate.
Ulster Bank said its income fell in the first quarter of 2011 compared to the same time last year due to higher funding costs and the continued high cost of deposit raising.
It said that loans and advances to customers fell by 4% due to weak new business demand. But customer deposits rose slightly in the three month period.
Before impairment charges, Ulster Bank said it made an operating profit of €98m for the quarter. It said its early restructuring measures have left it in a position to capitalise on those growth opportunities that are starting to emerge in the more consolidated Irish banking market.
RBS announces first quarter loss £529m sterling
Royal Bank of Scotland announced a first quarter loss as its exposure to Ireland's economic problems hit its earnings, and said it expected charges for bad debts from Ireland to remain high in the next quarter.
In an interim management statement, RBS said it made an overall first quarter loss of £528m sterling. Its earnings were hurt by £1.95 billion of impairments for bad loans, mainly in Ulster Bank.
The bank said that it expects total Ulster Bank impairments to remain high in the second quarter of 2011 before gradually declining in the second half of the year.
RBS said Ireland accounted for 78% of its bad debt provisions between January and March.
The British banking sector was rattled this week by Lloyds' shock £3.2 billion charge to cover compensation for people sold insurance they could never claim or did not know they were buying.
Lloyds made the provision against payment protection insurance (PPI) complaints after banks lost a British court case on the way policies were sold to millions of customers.
The policies were typically taken out alongside a personal loan, mortgage or purchase to cover repayment if the borrower was unable to pay due to unemployment, sickness or accident.
RBS said today that the impact from having to settle these insurance claims could be 'material' but added it was too early to provide an estimate.
