Natwest considering closing Ulster Bank in the ROI

Timing belt

kalych wrote: »

Staff costs have a direct correlation with the size of the market. Banking requires a certain number of Distribution, Operations, Finance, Risk, Third Line and IT staff. And these costs are then spread over the size of the market. Ireland with 5 million people means that these staff are not spread over too many customers, resulting in high staff costs.

Agreed there is a large fixed cost element which would indicate that unless Ulster was able to grow its market share or cut it's cost by investing in technology to automate processes and reduce it's staff no it will continue to struggle.

garrettod

Timing belt wrote: »

Agreed there is a large fixed cost element which would indicate that unless Ulster was able to grow its market share or cut it's cost by investing in technology to automate processes and reduce it's staff no it will continue to struggle.

There has been some investment in IT at Ulster Bank recently, from what I've seen.

It looks like you can do the full homeloan application online now, also things like small business loans online. Their app has also seen some improvements.

Claw Hammer

garrettod wrote: »

There has been some investment in IT at Ulster Bank recently, from what I've seen.

It looks like you can do the full homeloan application online now, also things like small business loans online. Their app has also seen some improvements.

That does not necessarily indicate large-scale investment in IT. It is more likely to be just tinkering around the edges. The reality is that in the Republic of Ireland, the two main 'pillar' is banks have a huge share of the market between them. Trying to take them on by way of organic growth will take a long time and cost a lot of money. The only other option is to acquire other smaller players in the market but in the case of the other players, all of them are small and not very attractive acquisitions.
unless the parent company has plenty of time and patience and is willing to keep a lot of capital tied up for very little return for a long time an exit strategy is the only option.

Jim2007

Timing belt wrote: »

Agreed there is a large fixed cost element which would indicate that unless Ulster was able to grow its market share or cut it's cost by investing in technology to automate processes and reduce it's staff no it will continue to struggle.

It really does not matter what they do. There is over capacity in the market and no one wants to pay for services, so trying gain a larger share of what is a commodity market is pointless, even the digital players are reporting losses.


We need to see a consolidation and elimination, before banks will become profitable again.

Timing belt

Jim2007 wrote: »

It really does not matter what they do. There is over capacity in the market and no one wants to pay for services, so trying gain a larger share of what is a commodity market is pointless, even the digital players are reporting losses.


We need to see a consolidation and elimination, before banks will become profitable again.

At the moment excess liquidity is costing the banks. It will be interesting to see if banks start passing on negative rates to savers or start putting caps on deposits in an effort to reshape balance sheets.

Jim2007

Timing belt wrote: »

At the moment excess liquidity is costing the banks. It will be interesting to see if banks start passing on negative rates to savers or start putting caps on deposits in an effort to reshape balance sheets.

Please explain exactly what you mean by this.

Timing belt

Jim2007 wrote: »

Please explain exactly what you mean by this.

At the moment the banks have more cash than they need.... just look at their Liquidity Coverage ratios. The Banks are being forced to keep this excess Liquidity in Government bonds or with the central bank.... Both of these are costing the banks as have negative yield/Rates.

The only options open to the banks to address the situation is
1) To lend more (to do this they would probably need to reduce their lending standards and take on more risk)
2) To try and change customers behaviour by either charging negative rates in the hope that it would cause customers to either spend the money or bank it somewhere else. Or in the event that they leave the funds with the bank that they will pass on some of the costs associated with the extra liquidity.

Charging negative rates to corporate/Institutional investors is now common practice however I can see banks trying to adopt this to their retail customer deposits but will introduce it on a tiered basis where any deposit over say 30k will be charged negative rates.

JTMan

The Sunday Times reports here (paywall):

- Winding up the bank is the option that appears to make the most sense for the UK banking giant.
- Within official circles, pessimism about Ulster Bank’s future is rife.
- CBI assurances, on wind-down protections, interpreted by some as a possible indication of which way the wind is blowing.
- Likely that Ulster Bank’s €22bn deposit book will simply be returned to customers.
- A decision may not be long in coming.
- Sources tell Sunday Times that a decision may come before annual results on 19 February "rather than dominating proceedings on results day".

JTMan

JTMan wrote: »

The Sunday Times reports here (paywall):

- Winding up the bank is the option that appears to make the most sense for the UK banking giant.
- Within official circles, pessimism about Ulster Bank’s future is rife.
- CBI assurances, on wind-down protections, interpreted by some as a possible indication of which way the wind is blowing.
- Likely that Ulster Bank’s €22bn deposit book will simply be returned to customers.
- A decision may not be long in coming.
- Sources tell Sunday Times that a decision may come before annual results on 19 February "rather than dominating proceedings on results day".

I wonder if viable is there a case for nationalisation? This wouldn't be a bank bailout, more support for industry.

Timing belt

[Deleted User] wrote: »

I wonder if viable is there a case for nationalisation? This wouldn't be a bank bailout, more support for industry.

I think 15-30bn could be used more effectively elsewhere so see zero appetite for nationalisation for a bank that struggles to make a profit.

Timing belt

Timing belt wrote: »

I think 15-30bn could be used more effectively elsewhere so see zero appetite for nationalisation for a bank that struggles to make a profit.

So not viable, and Natwest justified in closing to save 15-30b.

Szero

JTMan wrote: »

The Sunday Times reports here (paywall):

- Winding up the bank is the option that appears to make the most sense for the UK banking giant.
- Within official circles, pessimism about Ulster Bank’s future is rife.
- CBI assurances, on wind-down protections, interpreted by some as a possible indication of which way the wind is blowing.
- Likely that Ulster Bank’s €22bn deposit book will simply be returned to customers.
- A decision may not be long in coming.
- Sources tell Sunday Times that a decision may come before annual results on 19 February "rather than dominating proceedings on results day".

The dog on the street knows that Natwest are closing Ulster Bank. The sooner Natwest make their announcement and take customers and staff out of their misery the better.

Darc19

[Deleted User] wrote: »

I wonder if viable is there a case for nationalisation? This wouldn't be a bank bailout, more support for industry.

Nationalisation of a British bank??

State already owns an post, most of ptsb, and a large part of aib.

It doesn't need another financial institution.


Market has changed, digital banking and other alternatives will ensure competition.

Ulster is too small to be a main player and too big to be a niche player.

In the overall Natwest company, it is simply an annoyance.

But we should thank the uk taxpayers for the €15 billion

lawred2

Just remortgaged with them.. wonder who will buy the loan book

Timing belt

[Deleted User] wrote: »

So not viable, and Natwest justified in closing to save 15-30b.

NatWest have given ulster 10 years to turn the business around so yes they are justified in closing it

Jim2007

Deleted User wrote: »

So not viable, and Natwest justified in closing to save 15-30b.

It's not viable that is what we're at this point in the first place. The only alternative to closing down is to continue loosing money for the foreseeable future and risk the rest of the business...


Would you want to own a business where the majority of customers refuse to pay for your services and on the occasions where they do, your gross is measured in base points. You're operating in commodity industry and required to layout huge amounts of capital for the privilege.



This is not just an "Irish" problem, you can pick an EU state and you'll find their banking is the same mess. There is over capacity in the market and there is going to be no support within the EU to allow states to support the banking sector like this.


The problem with this market forces thingy, is that without ground rules the taxpayer/consumer always gets screwed in the end. We need to let this consolidation happen and then we need to regulate it to the extend that retail banking becomes a viable business in it's own right.

lawred2

Phishnet wrote: »

Jim,

Can you provide any factual background to your contention that the majority of Ulster Bank’s customers are refusing to pay for Ulster Bank’s services?

Can only presume he means that the market isn't too receptive of current account charges

Arthur Daley

Or a third of the country in looking to 'do a deal' at the first opportunity, at the expense of the other 2/3rds

Darc19

lawred2 wrote: »

Can only presume he means that the market isn't too receptive of current account charges

I would guess so too.

People were up in arms because "free banking" was withdrawn. (there's a thread somewhere about it and general gist was "I'm closing the account" or "I'm moving to revolut")

Now they complain because the bank is likely to close as it cannot make a return on their investment.

Claw Hammer

Phishnet wrote: »

Jim2007 is a moderator on this site and should be well able to articulate himself and not have other posters presuming what he meant. With regards the subject matter of the thread, I hardly think NatWest would be considering withdrawing Ulster Bank from here, due to not making money from free current a/c banking, would you?

NAT West has considered withdrawing from here because of not making money and having unproductive capital tied up here, not to mention the distraction toi management in its core market in the UK.

Darc19

Claw Hammer wrote: »

NAT West has considered withdrawing from here because of not making money and having unproductive capital tied up here, not to mention the distraction toi management in its core market in the UK.

They are profitable, but not profitable enough and they simply cannot see either a return of the financial injection that UB got from uk taxpayers or a profit level to warrant the current investment.

And as you say, a distraction that will never be a core part of the business

Q&A

Darc19 wrote: »

They are profitable, but not profitable enough and they simply cannot see either a return of the financial injection that UB got from uk taxpayers or a profit level to warrant the current investment.

That's basically it. Looking at the options they have to exit it's either a wind down, sell loans at a modest discount or sell the whole business.

Nat Wests equity in Ulster Bank amounts to about 15% of the Irish banks balance sheet. I presume that would be ball park for any discount they'd take on the business/loan book (+/- what net west think Ulster will earn/cost over the medium term). Anything less and they might as well wind it down.

Yyhhuuu

Darc19 wrote: »

I would guess so too.

People were up in arms because "free banking" was withdrawn. (there's a thread somewhere about it and general gist was "I'm closing the account" or "I'm moving to revolut")

Now they complain because the bank is likely to close as it cannot make a return on their investment.

This is complete b.s.

Most UK banks do NOT charge for current accounts. In fact Bank of Ireland GB dont charge either for their current accounts. It's all down to competition.

Bowlardo

How many people do they have working for them In total?

Jim2007

Yyhhuuu wrote: »

This is complete b.s.

Most UK banks do NOT charge for current accounts. In fact Bank of Ireland GB dont charge either for their current accounts. It's all down to competition.

Well if you ignore the facts, like the accounts etc....

- Thirty years ago we measured bank profits in percentages today we talk in base points, that is the 1/100 of 1%

- UB is being closed down because it is unprofitable for it’s owners and they are unable to find anyone willing to take it on.

- We’re all well aware of the IT outages at various banks across Europe and the primary cause is a lack of investment due to a lack of funds

- This is not some localized issue, it is a trend all across Europe.

- Even the digital banks and other support services are under pressure.

As for comparisons with the UK, fundamentally their banks are in the same, if not a worse position due to the loss of passporting services. This is the start of process and the only difference between any of the economies is timing.

Competition is what got us to this point. The banking sector has turned itself into a commodity industry and an unconsolidated one at that.

Darc19

Yyhhuuu wrote: »

This is complete b.s.

Most UK banks do NOT charge for current accounts. In fact Bank of Ireland GB dont charge either for their current accounts. It's all down to competition.

There's no headline charge, but look at all the charges.
They don't operate these accounts for charity purposes.

Yyhhuuu

Darc19 wrote: »

There's no headline charge, but look at all the charges.
They don't operate these accounts for charity purposes.

It is still much cheaper to operate a UK current account than an Irish one whatever way you look at it.

Timing belt

Yyhhuuu wrote: »

It is still much cheaper to operate a UK current account than an Irish one whatever way you look at it.

The UK benefits from economies of scale with 10 times the population and GBP is not in negative rates so they are not taking a financial hit like Irish banks so yes you are correct that it is cheaper.

If the UK do go into negative rate territory as some expect at the next MPC meeting then I think you will see the UK banks start increasing fees and passing costs on to customers as margins are to tight to take the hit.

Yyhhuuu

Yyhhuuu wrote: »

It is still much cheaper to operate a UK current account than an Irish one whatever way you look at it.

I'm with KBC. Annual current account cost is €10 government levy.

jahalpin

Yyhhuuu wrote: »

It is still much cheaper to operate a UK current account than an Irish one whatever way you look at it.

The UK banks apply substantially higher interest charges than the Irish banks, the charge for an overdraft is between 35% and 50%, they don't need to charge for day-to-day banking as a result