The landscape of Irish banking continues to change, with Ulster Bank reducing its financial presence, scaling back its activities and no longer seeking to become the number one or two player in a troubled domestic market. Since the financial crisis, Ulster Bank has already received a £15 billion (€18 billion) bailout from its British parent company, Royal Bank of Scotland (RBS), and last year it recorded a £1.5 billion operating loss. Last week RBS, which is 80 per cent owned by the British government, announced a reduced banking role for Ulster Bank in the Republic and in Northern Ireland. Some 40 bank branches in both parts of the island are expected to close, with substantial job losses likely.
Unlike Danske Bank and ACC, the latest overseas banks to wind down their Irish operations, RBS remains committed to maintaining its Irish business, albeit henceforth on a more modest scale. In future, Ulster Bank will rely more on providing advisory services to customers and less on handling transactions in a smaller branch network. Last week RBS said it was exploring “further opportunities to transform” Ulster Bank’s business in the Republic.
One such opportunity now under discussion would involve An Post, through its post office network, providing limited transaction facilities for Ulster Bank customers. Another involves a possible role for Ulster Bank as part of a third banking force, something Government and RBS have discussed. The latter proposal has obvious attractions for both parties. For RBS, a merger between Ulster Bank and some of its competitors – such as Permanent TSB which is 99.2 per cent State owned – would be welcome. It would enable RBS reduce its stake in Ulster Bank, and improve its balance sheet.
For Government, as Finance Minister, Michael Noonan has made clear it would facilitate greater competition in the banking sector. A third banking force would be better placed to challenge the existing duopoly (Bank of Ireland and Allied Irish Bank) and to provide greater access to – and wider availability of – credit that an expanding economy now needs so badly.
