ROYAL BANK of Scotland has set aside a further £1.3 billion for bad debts at Ulster Bank in the first quarter, bringing total loss provisions since the banking crisis began to £7.3 billion.

The Irish unit, which has a total loan book of £52.5 billion (€62 billion) continues to weigh heavily on RBS, accounting for 68 per cent of the overall loan loss charge across the banking group.

Losses on loans in Ireland will remain high during this quarter of the year before “gradually declining” in the second half of the year, said RBS in a detailed interim management statement.

Ulster Bank only reports losses in the “core” division and does not include figures for the performance of the “non-core” division which has been earmarked for disposal or to be run down over time. In the core division, the bank made an operating loss of £377 million (€441 million) in the first quarter as the bad debt charge more than doubled to £461 million on the same period last year due to a jump in mortgage losses.

The loss was almost three times worse than the £137 million deficit during the same period in 2010 and a deterioration of £106 million from the loss reported in the final three-month period of last year.

The operating loss figure covers the £37.2 billion of loans in the core division. The inclusion of the bank’s non-core division would push Ulster Bank’s first-quarter loss to well over £1 billion.

RBS took a further £839 million bad debt charge on £15.3 billion of loans in Ulster Bank’s non-core unit where there are £8.9 billion of property development loans, the most toxic at the bank, and £3.9 billion of property investment.

Ulster Bank accounts for 15 per cent of the non-core loans at RBS, but 78 per cent of bad debts.

Some £503 million of the impairment charge relates to Ulster Bank’s development loans.

This has risen from £362 million in the first quarter of last year but is down from the £596 million in the final quarter of 2010. Losses on property investment loans rose to £223 million from £99 million on the same period last year.

RBS, which is 83 per cent owned by the UK government following the bank’s bail-out during the 2008 financial crisis, reported a first quarter loss of £528 million due to heavy losses in Ireland.

Profits at its core business – the bank’s main retail and investment banking arms and excluding businesses due to be sold off – rose 25 per cent from the final quarter of 2010 to £2.1 billion, with profit margins also increasing.

“RBS is pulling off the recovery that we have targeted,” chief executive Stephen Hester said.

Ulster Bank continued to be affected by the “challenging economic climate across the island of Ireland”, said RBS.

The impairment charge on mortgages at Ulster Bank’s core division increased seven-fold, rising to £233 million. There were increases in the charges on property loans and corporate loans from the same period last year.

RBS identified deposit gathering and cost control as the key priorities for Ulster Bank as it “continues to focus on the long-term recovery of the business”.

Early restructuring left Ulster Bank in a position to capitalise on growth opportunities “starting to emerge in the significantly most consolidated Irish banking market, particularly in export-oriented sectors,” the bank said.

Ulster Bank chief executive Cormac McCarthy left the bank last month and was replaced by New Zealand banker Jim Brown.