TIDMFAP
RNS Number : 0795C
Ulster Bank Ireland DAC
18 February 2022
18 February 2022
Ulster Bank Ireland DAC
Ulster Bank - Annual Report and Accounts and Pillar 3 Report
2021
Ulster Bank Ireland DAC ( " UBIDAC " ) today announces the
publication of its 2021 Annual Report and Accounts.
This company is a wholly-owned subsidiary of NatWest Holdings
Ltd. ('NatWest Holdings'). The ultimate holding company is NatWest
Group plc ('NWG' or the 'ultimate holding company').
The 2021 Annual Report and Accounts for Ulster Bank Ireland DAC
is available on NatWest Group plc's website at
https://investors.natwestgroup.com/reports-archive
We have also published the 2021 Pillar 3 report which is also
available on our website.
Both reports are also published on UBIDAC's website at
https://digital.ulsterbank.ie/globals/about-us/corporate-information/financial-results.html
For further information, please contact
Investor Relations
Alexander Holcroft
+44 (0) 207 672 1982 (UK)
Ulster Bank Media Relations
+353 (0) 87 77 39 750 (ROI)
18 February 2022
For the purpose of compliance with the Disclosure Guidance and
Transparency Rules, this announcement also contains extracts from
the Report of the Directors on Principal Risks and Uncertainties
and Going Concern which are contained in the Annual Report and
Accounts 2021, in full unedited text. Page and note references in
the text refer to page and note numbers in the Annual Report and
Accounts 2021.
Principal risks and uncertainties
Set out below are certain risks and uncertainties which may
adversely affect the Group.
Risks and uncertainties arising from the Group's withdrawal from
the market
The Group's withdrawal from the market is expected to take a
number of years and may expose its business to many risks and
uncertainties that may have a material adverse effect on its
operating results, financial condition, outlook, prospects and
ability to comply with its regulatory capital requirements. These
risks and uncertainties may be accentuated by colleague and
customer reaction and external speculation about the Group's
future. The Board will continue to review and consider these risks
and uncertainties in seeking to achieve appropriate implementation
of the phased withdrawal strategy. The Group's capital and
liquidity positions remain strong to underpin this strategy.
Risks relating to potential transfers of the Group's businesses
and assets
The Bank has entered into legally binding agreements for the
proposed sale of the majority of the Group's performing commercial
loan book to Allied Irish Banks p.l.c. and for a material part of
the Group's personal banking business to Permanent TSB Group
Holdings plc (the 'Proposed Sales'). Successful completion of the
Proposed Sales remains subject to a number of risks and
uncertainties of which some are beyond the control of the Group.
These include: satisfying relevant conditions precedent, obtaining
regulatory and other approvals, potential legislative changes and
other transaction execution risks and uncertainties, including
purchasers' technology and operational capability (including
scaling of relevant platforms) to accept large volumes of customer
onboarding. Accordingly, the Proposed Sales may not be completed on
acceptable terms in the timescale envisaged, or at all.
As part of the Group's phased withdrawal from the market, it
will explore other potential transfers of its business and assets.
Whether any transfers are agreed will depend on a variety of
factors, such as the willingness and ability of purchasers to
complete the transfers on acceptable terms, including raising any
necessary financing when needed; purchasers' technology and
operational capability (including scaling of relevant platforms) to
accept large volumes of customer onboarding and continuing customer
service; and obtaining any necessary legislative, regulatory or
other approvals.
A phased withdrawal of the Group from the market, whether
effected by the Proposed Sales, other business transfers, asset
transfers, or other mechanisms, is likely to be highly complex from
an IT and operational perspective with full implementation to be
spread over the coming years. Changes may be required to the
Group's business model and strategy; and material execution,
commercial, legal, IT and operational risks may be involved.
Substantial effort, resource and expense may be needed to
mitigate the manual and limited capacity and capability of existing
customer account migration processes within the industry and any
customer onboarding capability issues of purchasers and other
banks.
Additional uncertainties include customer action or inaction,
the inability to obtain necessary approvals and/or support from
government agencies, regulators, trade unions and/or other
stakeholders resulting in additional cost, resource and delays,
resulting in significantly increased costs beyond acceptable
levels. The phased withdrawal, the Proposed Sales and any other
transfers may also be subject to various internal and external
factors and risks, including (but not limited to) market,
regulatory, economic and political uncertainties.
Successful implementation of the withdrawal, the Proposed Sales
and any other transfers will also depend on how the Group is
perceived by its customers, regulators, rating agencies,
stakeholders and the wider market, the Group's ability to retain
employees required to deliver the transition and its strategic
plans.
The Board will review and consider these risks in seeking to
achieve appropriate implementation of the phased withdrawal
strategy.
Potential adverse impacts of uncertainties on the Group
The above-mentioned uncertainties relating to the Group's phased
withdrawal, the Proposed Sales and any other transfer of the
Group's business and assets may, therefore, materially and
adversely affect the Group's business, results of operations,
financial condition, regulatory compliance and plans in many ways.
These adverse impacts include (but are not limited to):
- potential damage to the Group's brand and reputation from
press speculation, regulatory and other stakeholder scrutiny
regarding its future;
- increased operating costs and losses during the phased withdrawal;
- adverse impact on the Group's culture and morale from
increased people risk through the potential loss of key staff, loss
of institutional knowledge and increased challenges of attracting
and retaining colleagues;
- material and increased operational, IT system, culture,
conduct, business and financial risks due to colleague and customer
disengagement;
- the impact of disposal losses as part of an orderly rundown of
certain of the Group's loan portfolios which may be higher than
anticipated;
- regulatory risk, relating to the need for the Group to remain
compliant, including in relation to its prudential, conduct and
other regulatory and corporate governance requirements;
- the diversion of management resources and attention away from
day-to-day management of the Group; and
- potential diminished willingness of suppliers and other
counterparties to supply and transact with the Group on
preferential terms, or at all.
These risks and uncertainties may also jeopardise completion of
the Proposed Sales or any other transfers, result in higher than
expected operating costs, negatively impact the Group's products
and services offering and may adversely impact the Group's ability
to deliver its strategy.
The Board will review and consider these risks and uncertainties
in seeking to achieve appropriate implementation of the phased
withdrawal strategy.
Risks arising from customer remediation in respect of legacy
issues
The Group has materially concluded actions required as part of
the CBI's Tracker Mortgage Examination. However, some of the Bank's
customers have lodged tracker mortgage complaints with the
Financial Services and Pensions Ombudsman (FSPO). The Bank is
challenging three recent FSPO adjudications in the Irish High
Court. The outcome and impact of that challenge on those and
related complaints is uncertain but may be material.
Furthermore, there is a risk that throughout implementation of
the phased withdrawal process further issues may be identified that
require remediation.
Risks and uncertainties arising from COVID-19 pandemic
In many countries, including Ireland, the COVID-19 pandemic has,
at times, resulted in the imposition of strict social distancing
measures, restrictions on non-essential activities and travel
quarantines, in an attempt to slow the spread, and reduce the
impact, of COVID-19.
Despite widespread geographical deployment of COVID-19
vaccination programmes, the proliferation of COVID-19 variants
continues to impact the Irish and global economies. Further waves
of infection or the spread of new strains may result in renewed
restrictions in affected countries and regions. As a result,
significant uncertainties remain as to how long the impact of the
COVID-19 pandemic will last, and how it will continue to affect the
global economy.
In response to the COVID-19 pandemic and associated containment
measures, unprecedented government and central bank mechanisms to
support businesses and individuals, including various forms of
financial assistance, as well as legal and regulatory initiatives,
were introduced. However, uncertainty remains as to the impact of
the tapering or ending of these schemes and the repayment of the
related loans on customers, the economy and the Group.
Moreover, it is unclear as to how any secondary impacts and
risk-related factors, such as rising interest rates and inflation,
may affect the Group's business and performance.
The COVID-19 pandemic has prompted many changes that may prove
to be permanent shifts in customer behaviour and economic activity,
such as changes in spending patterns and more working from home.
These changes may have long-lasting impacts on the economic
environment, including asset values.
Uncertainties relating to the COVID-19 pandemic have made
reliance on analytical models more complex and may result in
uncertainty impacting the risk profile of the Group and/or that of
the wider banking industry. The medium and long-term implications
of the COVID-19 pandemic for the Group's customers, the Irish
housing market, and the Irish and global economies and financial
markets remain uncertain.
Risks and uncertainties arising from Brexit
The EU-UK Trade and Cooperation Agreement ('TCA') was
implemented on 1 January 2021. The TCA provides for free trade in
goods between the EU and UK, with zero tariffs and quotas on goods
that satisfy rules of origin requirements. Simultaneously the
Northern Ireland Protocol was implemented, with Northern Ireland
remaining in the EU single market for goods.
The future effects of Brexit on the Group's operating
environment remain difficult to predict. Those effects may be
impacted by wider global macro-economic trends and events,
particularly COVID-19 pandemic related uncertainties, which may
significantly impact the Group and its customers who are themselves
dependent on trading with the UK or personnel from the UK. Equally,
the future effects of Brexit may exacerbate the economic impacts of
the COVID-19 pandemic on Ireland, the rest of the EU/EEA and the
UK.
Furthermore, significant uncertainty remains as to the extent to
which UK law, under which the Group's parent
operates, will diverge from EU/EEA laws, whether and what
equivalence determinations will be made by the various regulators
and therefore what respective legal and regulatory arrangements the
Group will be subject to. The legal and political uncertainty and
any new or amended rules, could have a significant adverse impact
on the Group. This includes increases in operating, compliance and
restructuring costs and increased impairments. There is also
potential for adverse impacts on capital requirements, the
regulatory environment and taxation and, as a result, the Group's
business and performance.
Other risks and uncertainties
The Group remains vulnerable to risks and uncertainty in the
external economic environment, including persistent weakness in the
global economy; escalation in global trade disputes; shifts in the
international tax policy environment; persistently low or lower
interest rates; inflation risks; global financial market volatility
(including in euro area sovereign debt markets) linked to the
effects of highly accommodative monetary policy settings in
advanced economies and climate change. Furthermore, unfavourable
political, military or diplomatic events, including armed conflict,
state and privately sponsored cyber and terrorist acts or threats,
and the responses to them by governments and markets, could
negatively affect the Group.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
including potential risks and uncertainties, are set out in this
report on pages 4 to 7.
The financial position of the Group, its cash flows, liquidity
position, capital and funding sources are set out in the financial
statements. Notes 10, 22 and 32 to the accounts include the Group's
objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments and hedging activities; and its management of market,
credit and liquidity risks.
The Group's liquidity position remained strong during 2021,
evidenced by the Liquidity Coverage Ratio (LCR) of 167% at 31
December 2021 (2020 - 250%). The primary driver of the reduction in
the LCR ratio is the early maturity of the Group's TLTRO 3
borrowing of EUR3.1 billion. The Group's primary source of
liquidity is from personal and commercial customer deposits. The
Group's assets at 31 December 2021 contain EUR7.5 billion of high
quality liquid assets (2020 - EUR8.6 billion). In addition, this is
supported by contingent liquidity of EUR1.9 billion at 31 December
2021 (2020 - EUR3.0 billion). Furthermore, on 15 February 2022 the
Group entered into a EUR9.5 billion contingent liquidity agreement
with National Westminster Bank Plc, replacing a pre-existing
contingent liquidity facility of EUR1 billion.
The Group's capital position remained strong during 2021, as
evidenced by the CET1 ratio of 27.8% at 31 December 2021 (2020 -
28.1%).
Following the legally binding agreements for the sale of a
significant portion of the Commercial and Personal loan books, the
future scale and focus of the Group's operations will be materially
altered on completion of these transactions. Successful completion
of the Proposed Sales remains subject to a number of risks and
uncertainties of which some are beyond the control of the Group.
These include satisfying relevant conditions precedent, obtaining
regulatory, CCPC and other approvals, potential legislative changes
and other transaction execution risks and uncertainties.
Accordingly, the Proposed Sales may not be completed on acceptable
terms in the timelines envisaged or at all.
The directors have considered the Group's capital and liquidity
position as set out above and the results of stressed liquidity
scenarios and concluded that the Group has the ability to continue
as a going concern for the foreseeable future. The Group continues
to service existing customers across its full product range and
continues to write certain new business to existing customers.
However, there are material uncertainties as to the outcome and
timing of the Proposed Sales which will impact the timing of future
decisions in respect of the Group's business which may have a
bearing on the going concern assumption. Notwithstanding these
material uncertainties the directors are of the opinion that it
remains appropriate to prepare the accounts on a going concern
basis.
Forward-looking statements
This document contains forward-looking statements such as
statements that include, without limitation, the words 'expect',
'estimate', 'project', 'anticipate', 'commit', 'believe', 'should',
'intend', 'will', 'plan', 'could', 'probability', 'risk', 'target',
'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic',
'prospects' and similar expressions or variations on these
expressions. These statements concern or may affect future matters,
such as UBIDAC's future economic results, business plans and
strategies. In particular, this document may include
forward-looking statements relating to UBIDAC in respect of, but
not limited to UBIDAC's future economic results, business plans and
strategies, including its: phased withdrawal from the market;
potential transfers of UBIDAC's business and assets; potential
adverse impacts of uncertainties on UBIDAC; risks arising from
customer remediation in respect of legacy issues; and risks and
uncertainties arising from COVID-19 pandemic as well as Brexit.
Forward-looking statements are subject to a number of risks and
uncertainties that might cause actual results and performance to
differ materially from any expected future results or performance
expressed or implied by the forward-looking statements. Factors
that could cause or contribute to differences in current
expectations include, but are not limited to, the impact of the
Covid-19 pandemic, future acquisitions or divestments, the outcome
of legal, regulatory and governmental actions and investigations,
legislative, political, fiscal and regulatory developments,
accounting standards, competitive conditions, technological
developments, interest and exchange rate fluctuations and general
economic and political conditions and the impact of climate-related
risks. These and other factors, risks and uncertainties that may
impact the above, and any forward-looking statement or actual
results are discussed in UBIDAC's 2021 Annual Report and Accounts
(including its Principal Risks and Uncertainties). The
forward-looking statements contained in this document speak only as
of the date of this document and does not assume or undertake any
obligation or responsibility to update any of the forward-looking
statements contained in this document, whether as a result of new
information, future events or otherwise, except to the extent
legally required.
Legal Entity Identifier: UBIDAC - 635400KQIMALJ4XLAD78
STG GBP5,000,000 Floating Rate Subordinated IE0004325282
Bonds
IEP GBP30,000,000 11.375% Subordinated IE0004325399
Bonds
STG GBP20,000,000 11.75% Subordinated IE0004325514
Bonds
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END
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