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Ulster bank (may) be able to raise capital to buy the business, but not to support business?

Reports this morning in the Irish Examiner newspaper suggest that Ulster Bank’s management along with international investors may be about to buy the bank from its UK parent, the RBS Group. If this means that Ulster Bank will, under new ownership, break the mould of the oligopoly (a small number of players who dominate a market) to which it belongs, and then start lending to SMEs, then this would be classed as ‘a result’.

But while we are waiting for any outcome of any new ownership structure (there are lots of ifs in the story) it’s worth reflecting on the irony that this is a bank that appears not to be able to find money to lend to small companies, but apparently is able to find the money (there’s a highly speculative range of between half a billion Euro to two and a half billion Euro) to buy itself?

As a business case, for international investors to back a single investment (in this case a major bank in the Irish economy) cannot be as safe an investment as spreading that same money across thousands of smaller businesses in the Irish economy? Healthy growth of small growing companies is the only thing that can guarantee the growth of a lending bank. Without those healthy firms what can investors, savvy and all as they may think they are, expect from a bank that is at the same time doing nothing to save businesses, their bread and butter customers, from going to the wall?

Is this a case of putting the cash before the horse?