Natwest considering closing Ulster Bank in the ROI

Timing belt · 19-12-2020 5:06pm

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 · 19-12-2020 5:40pm

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 · 20-12-2020 5:18pm

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 · 20-12-2020 7:45pm

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 · 20-12-2020 7:52pm

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 · 20-12-2020 11:40pm

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 · 20-12-2020 11:53pm

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 · 03-01-2021 9:00am

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".

03-01-2021 9:19am

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 · 03-01-2021 9:34am

[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.

03-01-2021 9:52am

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 · 03-01-2021 10:06am

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 · 03-01-2021 10:08am

[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 · 03-01-2021 10:16am

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

Timing belt · 03-01-2021 10:20am

[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 · 03-01-2021 10:35am

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 · 03-01-2021 6:54pm

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 · 03-01-2021 8:28pm

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 · 03-01-2021 8:31pm

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 · 05-01-2021 10:23pm

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 · 05-01-2021 10:28pm

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 · 06-01-2021 7:48pm

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 · 10-01-2021 4:12am

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 · 10-01-2021 4:49am

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

Jim2007 · 10-01-2021 7:39am

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 · 10-01-2021 9:23am

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 · 11-01-2021 12:08am

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 · 11-01-2021 12:15am

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.

11-01-2021 8:53am

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 · 11-01-2021 2:09pm

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

kalych · 11-01-2021 11:40pm

Since UB is the only local bank not participating in this initiative, is it another clue that the decision has already been taken and they're just trying to find a buyer for their portfolio?

https://www.irishtimes.com/business/financial-services/irish-banks-club-together-with-new-digital-service-to-counter-revolut-threat-1.4455772

Timing belt · 11-01-2021 11:51pm

kalych wrote: »

Since UB is the only local bank not participating in this initiative, is it another clue that the decision has already been taken and they're just trying to find a buyer for their portfolio?

https://www.irishtimes.com/business/financial-services/irish-banks-club-together-with-new-digital-service-to-counter-revolut-threat-1.4455772

you are probably correct.... I can't see the CCPC approving this app anyway as it is anti-competitive and would be an extra barrier for any bank to entering the Irish Market or a fintech company offering services. If they approve it then they are endorsing a oligopoly in the banking/fintech sector.

TempAc · 12-01-2021 1:03am

kalych wrote: »

Since UB is the only local bank not participating in this initiative, is it another clue that the decision has already been taken and they're just trying to find a buyer for their portfolio?

https://www.irishtimes.com/business/financial-services/irish-banks-club-together-with-new-digital-service-to-counter-revolut-threat-1.4455772

Lol, an IT project not just from one Irish bank, but multiple Irish banks together. I'm sure that will turn out great :rolleyes:

Or they could just implement SEPA Instant...

kalych · 12-01-2021 1:06am

Timing belt wrote: »

you are probably correct.... I can't see the CCPC approving this app anyway as it is anti-competitive and would be an extra barrier for any bank to entering the Irish Market or a fintech company offering services. If they approve it then they are endorsing a oligopoly in the banking/fintech sector.

I generally don't see a point in it as China has just announced the digital Yuan and ECB are investigating similar options for the Euro. A digital Euro would effectively be a free EU-wide instant payment processing network. These banks are about 10 years too late to the party.

I only linked the article with reference to UB not participating though. Otherwise i fully agree with your assessment with regards to anti-competitiveness.

Unknownability · 12-01-2021 1:16am

Timing belt wrote: »

you are probably correct.... I can't see the CCPC approving this app anyway as it is anti-competitive and would be an extra barrier for any bank to entering the Irish Market or a fintech company offering services. If they approve it then they are endorsing a oligopoly in the banking/fintech sector.

It states in the article that the software will be available to all financial institutions in Ireland just developed by the 4.

Timing belt · 12-01-2021 1:18am

TempAc wrote: »

Lol, an IT project not just from one Irish bank, but multiple Irish banks together. I'm sure that will turn out great :rolleyes:

Or they could just implement SEPA Instant...

lol... it will probably be delivered 4 years late and at twice the cost... :P

On a serious note all they are doing is trying to put up barriers to ensure that they can charge higher prices.

As you say if they implemented SEPA Instant it solves a lot of the problems. It is a European payment scheme that the banks should be forced to adopt anyway to enable customers to move up to funds. I would see it as an essential service for any half decent customer proposition. It is what Revolute use for European payments and they use faster payments in the UK (which all the UK banks are signed up to)

Timing belt · 12-01-2021 1:25am

Unknownability wrote: »

It states in the article that the software will be available to all financial institutions in Ireland just developed by the 4.

At what cost???

Are they not able to implement Sepa instant like the rest of Europe and stop trying to be bespoke so they can charge more...

They are small banks in the grand scheme of things and should be able to be flexible and adapt to change as they will have simpler systems unlike some of the big banks in Europe.

Yyhhuuu · 12-01-2021 2:03am

[Deleted User] wrote: »

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

Yes with KBC€2k per month must be lodged. They have no cashier. EBS offer a full banking service with a free current account with no conditions

garrettod · 12-01-2021 3:36am

This new Irish banking app project reminds me of when European Banking was rolling out debit cards, largely linked to the Mastercard or Visa networks, so with international acceptance. For reasons that never made sense to me, Irish Banks decided to go and create their own debit card (the Laser card), with slower processing times, and the lack of any form of international acceptance, ability to transact in foreign currency etc. No doubt the Irish Banks spent a fortune rolling it out, and somebody's mate became a millionaire as a result of Laser cards being launched, and eh, where is it now?

kalych wrote: »

I generally don't see a point in it as China has just announced the digital Yuan and ECB are investigating similar options for the Euro. A digital Euro would effectively be a free EU-wide instant payment processing network. These banks are about 10 years too late to the party.

I only linked the article with reference to UB not participating though. Otherwise i fully agree with your assessment with regards to anti-competitiveness.

Did you consider that UB might not have signed up to the project, because they saw it as a waste of money, being introduced too late etc ?

The J Stands for Jay · 12-01-2021 10:18am

[Deleted User] wrote: »

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

Stop using ATMs and it'll be free.

12-01-2021 11:48am

McGaggs wrote: »

Stop using ATMs and it'll be free.

Actually, forgot about the way the new levy works. Way less than €10 in that case. Rarely take out cash.

Who even uses cash these days. One does wonder, does one.

garrettod · 12-01-2021 2:02pm

[Deleted User] wrote: »

Actually, forgot about the way the new levy works. Way less than €10 in that case. Rarely take out cash.

Who even uses cash these days. One does wonder, does one.

Assuming you can transfer from KBC to Revolut for free, you can withdraw €200pm free via the Revolut card.

That should be more than enough cash, for anyone that needs it.

12-01-2021 2:47pm

garrettod wrote: »

Assuming you can transfer from KBC to Revolut for free, you can withdraw €200pm free via the Revolut card.

That should be more than enough cash, for anyone that needs it.

I can, but don't you have to pay for the Revolut card

AlmightyCushion · 12-01-2021 3:13pm

garrettod wrote: »

Assuming you can transfer from KBC to Revolut for free, you can withdraw €200pm free via the Revolut card.

That should be more than enough cash, for anyone that needs it.

The levy applies to Revolut as well so there is no saving doing this. Only difference is Revolut charge for it at the time and KBC charge for it at the end of the year.

garrettod · 12-01-2021 7:45pm

[Deleted User] wrote: »

I can, but don't you have to pay for the Revolut card

Ah, sorry, afraid you caught me sleeping, with regards to the stamp duty :redface:

JAMCAR · 12-01-2021 10:12pm

Sorry if this question was asked beforehand, but if the bank does close what will happen to the credit card customers. will that be taken over by another company or will it just be dissolved.

Quackster · 12-01-2021 11:15pm

JAMCAR wrote: »

Sorry if this question was asked beforehand, but if the bank does close what will happen to the credit card customers. will that be taken over by another company or will it just be dissolved.

Either is possible but one would expect the credit card business to be pretty sellable.

kalych · 13-01-2021 11:26am

garrettod wrote: »

Did you consider that UB might not have signed up to the project, because they saw it as a waste of money, being introduced too late etc ?

Not after i read this:
"Ulster Bank, which is not a founding member but was known to have been involved in initial discussions about the plan, “hope to join the scheme at a later date”, a spokeswoman for the lender said."
As per:
https://www.irishtimes.com/business/financial-services/irish-banks-select-italian-fintech-sia-to-develop-app-to-rival-revolut-1.4456721

If they thought it was a waste of money they would not have been involved at the start and then pulled out. Seems like they just didn't want to commit to the capital spend required.
But obviously none of us know for sure apart from UB and NATWEST heads.

Claw Hammer · 13-01-2021 12:45pm

The writing is on the wall. Nobody who has any intentions of even the possibility of continuing a business will allow speculation of its impending closure to continue for so long.
They have rebranded in Northern Ireland leaving the South sticking out like a sore thumb. It is only a question of when they were close, not if.

14-01-2021 1:50pm

Claw Hammer wrote: »

They have rebranded in Northern Ireland leaving the South sticking out like a sore thumb. It is only a question of when they were close, not if.

Rebranded to what? PS, no they haven’t rebranded to anything in NI.

Natwest considering closing Ulster Bank in the ROI

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