ULSTER Bank has seen an increase in payments from borrowers who are in deep mortgage arrears, following last year’s sale of a €1.4bn portfolio of distressed home loans to the US investment giant Cerberus.

Another major sale is now planned which will be made up exclusively of residential mortgages and is expected to close in the second half of this year, Ulster Bank CEO Jane Howard said yesterday.

Ms Howard dismissed speculation that Ulster Bank could look to merge with Permanent TSB or another Irish lender, following a recent analysis from Davy that a deal could boost profitability.

In relation to loan sales, Ulster Bank has stressed for some time that customers who engage with the bank and make repayments, even on loans in deep arrears, are less likely to see their loan sold to so-called vulture funds.

Recent months have seen a “pick- up in people engaging with us” and “repayment flows are picking up too,” Ms Howard said.

As well as loan sales focusing attention on the issue, the bank had reached out to customers – including the hiring of debt servicer Pepper – and was seeing benefits from the jobs rebound, she said.

Ulster Bank is under pressure from European regulators to cut its non- performing loan (NPL) ratio below 5pc of total lending by the end of this year from the current 11.3pc. This is the target of the sale now in train.

The lender reported an operating profit of €15m for 2018, boosted by provision write-backs following its controversial sale of problem loans last year. This follows a loss of €151m in 2017, according to full-year results from the bank.

The now separately-operated Ulster Bank in Northern Ireland made a pre-tax profit of £51m.

In the Republic, total income was in line with the prior year at €689m, and costs were reduced to €657m from €772m in 2017.

The bank increased its share of the growing new mortgage lending market to 17pc – up from 9pc. Its own new mortgage lending also increased, by 13pc to €1.13bn.

That hike was helped by a cut in Ulster’s fixed-rate mortgage pricing in July last, Ms Howard said, adding that the mortgage market is competitive but further price cuts are constrained by the high capital requirements in the Irish market.

The bank will have to compete on service in the medium term, including leveraging technology from its UK parent RBS, she said.

Lending growth to the SME sector is constrained by a lack of borrower appetite, which is partly attributable to Brexit, stated Ms Howard.

“SME borrower appetite is slower. With Brexit, people are delaying investment,” she said.

Business customers are also being hit by labour shortages throughout the country and, Howard claimed, in many cases prefer to draw on cash flow than to borrow.

Ulster Bank, which is ultimately owned by UK taxpayers through its parent RBS is prepared for Brexit, Ms Howard said. “The bank’s job is to keep calm, to make sure we look after liquidity and look after customers.”

Results for 2018 show the bank’s net interest margin – a key barometer of profitability of banks – improved by 12 basis points to 1.79pc. That remains below rivals AIB and Bank of Ireland.

Tracker mortgage redress cases have cost the bank €300m, chief financial officer Paul Stanley said.

The bank identified close to 5,500 affected customers, and is on course to have completed its redress programme by the end of April.

Lessons have been learned, Ms Howard said, including to prioritise clarity and transparency in communicating with customers.

However, she said she did not believe the bank had set out to dupe customers into taking up less-favourable mortgage options.

“From what I have seen I don’t believe there was bad intent,” she said.

Meanwhile, Ulster Bank’s parent, RBS, reported a pre-tax profit for the year of £3.4bn, beating forecasts and proposed to pay £1.6bn in dividends. Ulster Bank paid RBS a dividend of €1.5bn last year.

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