RBS 2008 Annual Report Download - page 63

RBS Group Annual Report and Accounts 200862
Business review continued
In January 2009, Ulster Bank announced its intention to adopt a single
brand strategy under the Ulster Bank brand. This will see the merger of
the operations of Ulster Bank and First Active in the Republic of Ireland
(‘RI’) by the end of 2009. This action is being taken to strengthen the
Ulster Bank Group franchise by positioning it to deal with the prevailing
local and global market conditions. A number of cost management
initiatives have also commenced across the business.
Ulster Bank has launched a series of initiatives to support its customers
in this difficult economic period. We announced in February 2009 that
we will be making significant funds available to the Northern Ireland
(‘NI’) SME market. A similar announcement will be made in the coming
weeks regarding the RI SME market. Ulster Bank has also indicated that
it is adopting the RBS Group pledge regarding certainty of overdraft
limits for this sector.
The Momentum and Secure Step mortgages have been launched in NI
and RI respectively to support First Time Buyers and the Bank has
confirmed its pledge of a six-month moratorium to mortgage customers
facing potential repossession. In support of our retail customers across
the island of Ireland, the Group’s MoneySense programme is being
rolled out, with trained advisers being introduced to all Ulster Bank
branches.
Outside Ireland, Europe & Middle East Retail & Commercial Banking
continued to trade satisfactorily, although our markets in the United Arab
Emirates, Romania and Kazakhstan have also experienced a marked
slowdown in the past year. In UAE, where we are a market leader in
credit cards with over 430,000 cards in issue, credit card revenue
increased 22% in the year.
The sale of the European Consumer Finance business to Santander
was completed on 1st July 2008, while the Imagine business in Spain
was sold to Bank of America in the second half of 2008. The former
ABN retail business in Russia was also closed during the year.
Strategic review
Ulster Bank, which remains a core part of the Group’s global banking
operations, has a strong franchise in both Northern Ireland, where it is
the leading bank, and the Republic of Ireland where it is overall the
third-positioned bank. It has the product and distribution capability to
grow profitably and well in normal market conditions. However, the
economic difficulties that the Irish markets currently face are expected
to persist for some time. Ulster Bank has been pro-active in responding
to these market conditions through a programme of initiatives. The
business plans to manage its balance sheet over the medium term, with
particular focus on reducing risk concentrations as market conditions
allow, whilst increasing and diversifying its customer deposit base.
The E&ME Retail and Commercial franchises outside of Ireland lack
scale and breadth. They would require a very significant investment of
capital and management resource to be able to achieve levels of
shareholder return equivalent to those possible from more established
core franchises in the Group. The Retail and Commercial businesses in
E&ME outside of Ireland will be transferred to the non-core division. We
have commenced a review to consider future options for these
businesses, including options for sale.
2008 compared with 2007 – statutory
Total income was up £172 million, 13% at £1,518 million benefiting from
the full year of the ABN AMRO businesses and movements in exchange
rates. Direct expenses rose by £104 million, 23%.
Impairment losses rose sharply to £526 million from £118 million in
2007 leading to a decline in contribution of £340 million to £429 million.
Contribution before impairment losses increased by £68 million.