IRELAND EXACERBATES PAINFULLY SLOW RECOVERY

THE Qataris might be making positive noises about snapping up the government’s bank stakes, but it will be some time before they are ready to buy shares in troubled RBS. Yesterday investors got more of the same from chief executive Stephen Hester: steady but painfully slow progress.

It was Ireland, that troubled Emerald Isle, which proved the biggest drag on earnings. Impairments at Ulster Bank were a hefty £1.2bn in 2010 and management are expecting them to remain high in the first half of this year. With around £53bn of exposure, of which £19bn is in dreaded commercial real estate, it’s clear that the bank will need to take several further large impairments (Evolution reckons there is another £3bn to come).

A glance at Ulster Bank’s loan-to-deposit ratio highlights the problem. It stood at 152 per cent in 2010 and, in 2009, it was an eye-watering 177 per cent (proof if it were needed that Ireland’s property bubble was especially pernicious). To put that in perspective, the loan-to-deposit ratio in UK retail was 110 per cent.

Yesterday, the shares closed down 3.21 per cent at 45.6p, down from this year’s high of 49p. That is partly because the attributable loss of £1.1bn missed expectations of around £700,000. But it also reflects the fact that the shares, which were trading at 39p at the beginning of the year, have had a good run and these results failed to live up to the hype.

Ian Gordon at BNP Paribas was right when he told investors to “take the money and run” on 18 February, and he likely still is. The recovery of RBS is very much a work in progress, and an unremittingly sluggish one at that.