RBS 2012 Annual Report Download - page 192

190
Business review Risk and balance sheet management continued
Key credit portfolios* continued
Ulster Bank Group (Core and Non-Core)
Overview
At 31 December 2012, Ulster Bank Group accounted for 10% of the
Group’s total gross loans to customers (2011 and 2010 - 10%) and 8% of
the Group’s Core gross loans to customers (2011 - 8%; 2010 - 9%).
Ulster Bank’s financial performance continues to be overshadowed by the
challenging economic climate in Ireland, with impairments remaining
elevated as high unemployment, coupled with higher taxation and limited
liquidity in the economy, continues to depress the property market and
domestic spending.
The impairment charge of £2,340 million for 2012 (2011 - £3,717 million;
2010 - £3,843 million) was driven by a combination of new defaulting
customers and higher provisions on existing defaulted cases due
primarily to deteriorating security values. Provisions as a percentage of
risk elements in lending increased from 53% in 2011, to 57% in 2012,
predominantly as a result of the deterioration in the value of the Non-Core
commercial real estate development portfolio. Ulster Bank impairment
provisions take into account recovery strategies for its commercial real
estate portfolio, as currently there is very limited liquidity in Irish
commercial and development property.
Core
The impairment charge for the year of £1,364 million (2011 - £1,384
million; 2010 - £1,161 million) reflects the difficult economic climate in
Ireland, with elevated default levels across both mortgage and other
corporate portfolios. The mortgage sector accounted for £646 million
(47%) of the total 2012 impairment charge.
Non-Core
The impairment charge for the year was £976 million, a decrease of
£1,357 million (2011 - £2,333 million; 2010 - £2,682 million), with the
commercial real estate sector accounting for £899 million (92%) of the
total 2012 impairment charge.
Credit metrics
Gross
loans REIL Provisions
REIL
as a % of
gross loans
Provisions
as a % of
REIL
Provisions
as a % of
gross loans
Impairment
charge
Amounts
written-off
Sector analysis £m £m £m % % % £m £m
2012
Core
Mortgages 19,162 3,147 1,525 16.4 48 8.0 646 22
Commercial real estate
- investment 3,575 1,551 593 43.4 38 16.6 221 —
- development 729 369 197 50.6 53 27.0 55 2
Other corporate 7,772 2,259 1,394 29.1 62 17.9 389 15
Other lending 1,414 207 201 14.6 97 14.2 53 33
32,652 7,533 3,910 23.1 52 12.0 1,364 72
Non-Core
Commercial real estate
- investment 3,383 2,800 1,433 82.8 51 42.4 288 15
- development 7,607 7,286 4,720 95.8 65 62.0 611 103
Other corporate 1,570 1,230 711 78.3 58 45.3 77 23
12,560 11,316 6,864 90.1 61 54.6 976 141
Ulster Bank Group
Mortgages 19,162 3,147 1,525 16.4 48 8.0 646 22
Commercial real estate
- investment 6,958 4,351 2,026 62.5 47 29.1 509 15
- development 8,336 7,655 4,917 91.8 64 59.0 666 105
Other corporate 9,342 3,489 2,105 37.3 60 22.5 466 38
Other lending 1,414 207 201 14.6 97 14.2 53 33
45,212 18,849 10,774 41.7 57 23.8 2,340 213
*unaudited