RBS 2007 Annual Report Download - page 60

RBS Group • Annual Report and Accounts 2007
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Business review continued
2006 compared with 2005
Ulster Bank made strong progress in both personal and
corporate banking in the Republic of Ireland and in Northern
Ireland, with total income rising by 12% to £1,125 million.
Contribution increased by 12% to £636 million and operating
profit by 17% to £421 million.
Net interest income increased by 15% to £873 million,
reflecting good growth in both loans and customer deposits.
Average loans and advances to customers increased by 28%,
and average customer deposits by 15%. A principal focus
during 2006 was the expansion of our corporate banking
franchise, and we succeeded in increasing corporate
customer numbers by 7% in the Republic of Ireland and by 4%
in Northern Ireland. This contributed to strong growth in both
corporate lending, where average loans and advances
increased by 32%, and deposits, with Ulster Bank winning a
share of new business current accounts well in excess of its
historic market share, particularly in the Republic of Ireland.
Average mortgage balances grew by 26%, although the rate
of growth was slower in the second half when there was some
evidence of a more subdued pace of expansion in the
mortgage market. The change in business mix resulting from
strong growth in corporate lending and mortgages, together
with some competitive pressures, led to a modest reduction
in net interest margin in the first half, with margin stabilising
in the second half.
Non-interest income rose by 3% to £252 million. Ulster Bank
achieved good growth in fees from credit cards and ATMs
as well as in sales of investment products, which was only
partially offset by the introduction of Ulster Bank’s new range
of current accounts, which are free of transaction fees.
Total expenses increased by 10% to £600 million, as we
continued our investment programme to support the future
growth of the business. We recruited additional customer-
facing staff, particularly in corporate banking, opened
three new business centres and continued with our branch
improvement programme. By the end of 2006, 70% of
Ulster Bank branches had been upgraded.
During 2006 we successfully completed the migration of
our core systems to the RBS Group manufacturing model
and, as a result, we now have access to the complete RBS
product range.
The credit environment remains benign. Impairment losses
rose by £9 million to £104 million, consistent with growth in
lending.
Business review