DUBLIN (Reuters) - Royal Bank of Scotland's (RBS) (L:RBS) Irish operation Ulster Bank will pay its parent company a dividend for the first time since the financial crisis, saying on Friday that it had received regulatory approval to release 1.5 billion euros ($1.59 billion) of capital.
Ulster Bank, which operates separate regulated entities on both sides of the Irish border under the same name, will pay the dividend from its operations in the Irish republic, where lenders have benefited from a swift economic recovery.
"Today's announcement signals a very important milestone and is evidence of our strengthening position," Ulster Bank Chief Executive Gerry Mallon said in a statement.
"Ulster Bank remains very well capitalised with a strong balance sheet."
The payment will also allow RBS, which had to prop up Ulster Bank with about 15 billion pounds during Ireland's banking crisis, to release trapped capital at a group level.
Ulster Bank's Core Tier 1 capital (CET1) ratio -- a measure of financial strength -- will stand at 24 percent after the payment, significantly ahead of regulatory requirements.
The average aggregate core ratio of the 51 main European Union lenders ahead of stress tests this year was 12.6 percent, with all capital requirements factored in.
In addition, Ulster's risk-weighted assets as a percentage of its total assets are at a European-leading 92 percent, Goodbody Stockbrokers analyst Eamonn Hughes wrote in a note, adding that this leaves "ample scope" for future payments.
The bank, which said the timing of its payment is subject to approval by the board on Nov. 29, is not alone among Irish lenders seeking to resume dividends.
Bank of Ireland (I:BKIR), the country's largest bank by assets and in which the state holds a 14 percent stake, laid out plans in February for a resumption of dividends in the first half of next year but said in July that the timing could be affected by Britain's vote to leave the European Union.
Wholy state-owned Allied Irish Banks (I:ALBK), which had a CET1 ratio of 13.3 percent at the end of June, said on Thursday that it is capable of paying a conservative, ongoing dividend to the state and that it is in regulatory talks over when it can restart payments.
($1 = 0.9444 euros)
