News that Ulster Bank paid an €800 million dividend to its UK parent NatWest Group yesterday as part of the process of repatriating excess capital on its balance sheet as it hastens its withdrawal from the Republic must be a painful reminder for British taxpayers of the bailout it received post the 2008 financial crash.
To recap, Ulster Bank received an effective £15 billion (€17.5 billion) bailout from British taxpayers during the financial crisis. The rescue bill equated to a third of the total UK government’s £45 billion (€53 billion) 2008 bailout of NatWest, when the group was known as Royal Bank of Scotland.
In return, Ulster Bank paid €3.5 billion of dividends to its parent between 2016 and 2019, representing just a fifth of the bailout it received.
After years of trying to find a formula to make the business in the Republic work, including separating it out from Ulster Bank’s operation in Northern Ireland and selling off various non-performing loans, NatWest decided in 2021 to throw in the towel and exit the market here. Having to hold so much capital in the Irish business for regulatory purposes wasn’t worth the hassle or distraction for the British lender.
Another €1.8 billion in shareholders funds is likely to flow to the parent before the operation here is fully wound up. NatWest does also hold an 11.7 per cent share of Permanent TSB, which it received to help fund a deal that saw some of the Ulster Bank business acquired by PTSB.
But that stake is small beer in the overall scheme of things. The sale earlier this month of a 5 per cent stake in PTSB raised €55 million for the UK lender.
Consumers here could also be losers in the exit of Ulster Bank, given that just three domestic mainstream lenders will be left in the market. The real winner is PTSB, which now has a balance sheet size and access to the business banking market that gives it a chance of taking on AIB and Bank of Ireland in a meaningful sense.
