RBS 2011 Annual Report Download - page 76

74 RBS Group 2011
Ulster Bank continued
2010 compared with 2009
Overall performance deteriorated in 2010, largely as a result of an
increase in impairment losses of £512 million. Operating profit before
impairment increased to £400 million, up 50% in constant currency terms,
driven by the culmination of a bank-wide cost saving programme during
2010.
Net interest income increased by 1% on a constant currency basis as
actions to increase asset margins were largely eroded by tightening
deposit margins due to intensive market competition.
Non-interest income was 14% lower on a constant currency basis
reflecting a non-recurring gain in 2009.
Loans to customers fell by 5% in constant currency terms. On 1 July
2010 the division transferred a portfolio of development property assets
to the Non-Core division, partially offset by a simultaneous transfer of a
portfolio of retail mortgage assets to the core business.
Despite intense competition, customer deposit balances increased by 8%
in constant currency terms over the year with strong growth across all
deposit categories, driven by a focus on improving the bank’s funding
profile.
Expenses at constant exchange rates were 22% lower. The strong year-
on-year performance in expenses was primarily driven by an increased
focus on active management of the cost base, and the benefits derived
from the business restructuring and cost-saving programme which
commenced in 2009.
Impairment losses increased by £512 million to £1,161 million reflecting
the deteriorating economic environment in Ireland and rising default
levels across both personal and corporate portfolios. Lower asset values,
particularly in property-related lending together with pressure on
borrowers with a dependence on consumer spending have resulted in
higher corporate loan losses, while higher unemployment, lower incomes
and increased taxation have driven mortgage impairment increases.
Risk-weighted assets have increased due to deteriorating credit risk
metrics.
Customer numbers increased by 3% during 2010, with a strong
performance in current and savings accounts switchers.
Business review continued