Ulster Bank to pay RBS €1.5bn dividend

The move by the Edinburgh-based lender’s subsidiary means Ulster Bank Ireland will be the first major bank to pay out a dividend since the financial crash, having received approval from both the Central Bank of Ireland and the European Central Bank to release the funds.

It will mean RBS, which is still more than 70 per cent state-owned, can begin clawing back some of the £15bn (€17.6bn) it used to prop up the Irish business after the wake of the financial crash.

RBS pumped almost a third of the £45bn bailout package granted to it by the UK government into Ulster Bank during the dark days of 2008.

After the payment, Ulster Bank Ireland will have a tier one capital ratio (CET1) in excess of 24pc, leaving the institution well in excess of the levels required by regulators.

Ulster Bank CEO Gerry Mallon said the announcement signals “a very important milestone” for the company.

“Ulster Bank remains very well capitalised with a strong balance sheet and is well-positioned to continue to support customers’ ambitions through our excellent products and service,” Mr Mallon said.

Goodbody analyst Eamonn Hughes expects further payments of a similar nature down the line.

“Ulster Bank Ireland’s CET1 ratio will be in excess of 24pc post the dividend payment, significantly above minimum capital requirements,” he said. “In addition to this, Ulster Bank’s risk-weighted asset (RWA) density is 92pc – the highest among European peers,” he added in a note to the markets.

Ulster Bank was the weakest unit within RBS in the immediate aftermath of the credit crunch, and a drain on group capital.

However, while Ulster Bank is now profitable, RBS posted an attributable loss of £469m in the third quarter of this year, as litigation and restructuring costs took their toll.