Ulster Bank said on Tuesday it was paying a 500 million euro dividend to its parent company, Royal Bank of Scotland, as it continued to tap into its excess capital reserves to return some of its money from rescue.
The latest installment brings in €3.5bn which has been repaid as dividends to RBS since the end of 2016. The total figure equates to almost 20% of the £15bn (€17.7bn) Ulster Bank received from RBS during the financial crisis.
The bank’s Common Equity Tier 1 (CET1) ratio – a key measure of a bank’s reserves that are there to withstand a shock loss – will remain the highest among the country’s five remaining banks, at 27%, after payment. The broader RBS group has a medium-term target ratio of around 14%.
“With a CET1 ratio of 27%, Ulster Bank still has significant means to continue to pour capital into its parent company,” said Eamonn Hughes, analyst at Goodbody Stockbrokers.
Regulatory pressures on Irish lender capital continue to mount after the Bank of England said on Monday night it was increasing the amount of capital it requires banks to set aside to protect them from a sudden downturn . The regulator has increased the so-called countercyclical capital buffer requirement for the end of next year from 1% of risk-weighted assets to 2%.
Davy analysts Diarmaid Sheridan and Stephen Lyons believe this will likely help Bank of Ireland and AIB, both of which have UK operations, raise their own CET1 management targets by half a point each at 15.5% and 14%, respectively. Internal targets will also be fueled by the planned introduction of a systemic risk buffer by the Central Bank of Ireland next year.