Dr. Ailish Byrne:

I thank the Chairman and members of the committee for inviting us here today. We welcome the opportunity to talk to the committee about Ulster Bank's participation in the SBCI agricultural cashflow support loan scheme and our support for the agrifood sector. I am Ulster Bank’s senior agricultural manager. I am joined by my colleague, Eddie Cullen, managing director of our commercial banking division.

Ulster Bank is the third largest bank in the Republic of Ireland. It is unique as the only systemic bank that operates in the Republic of Ireland owned by a parent with international reach. Our strategic ambition is to be the number one bank for customer service. We are focused on making Ulster Bank a customer-centred bank that is simpler, more agile and offers an appealing alternative to the dominant players in the market. We recognise the importance of agriculture to the economic and social fabric of the country. It is a core part of our business.

The improved economic and market sentiment and higher demand for credit has continued into 2017. We firmly believe that for the Irish economy to continue to recover, it is essential that there is competition in the banking market. We are determined to provide that competition across all the sectors in which we operate.

The agriculture sector is a key component of our business and accounted for 22% of our total SME business lending in quarter one of 2017. This activity was primarily driven by our existing customer base renewing their annual working capital facilities and the extension of new term debt to farmers seeking to expand and-or modernise their farm businesses. This activity was most evident in the dairy and poultry sectors. Our banking relationships in the agrifood sector start with the many farmers who bank with us, and include agribusinesses from artisan food producers up to the largest multinational food manufacturing businesses. Our relationship with many of these customers stretches back for decades.

At Ulster Bank, we have skilled managers who understand farming. Our agri-training programme is accredited by Chartered Banker and 66 of our colleagues in our credit and front-line teams have completed this course. Due to the calibre and success of this Ulster Bank developed programme, it was adopted by the Institute of Bankers as a module in 2016 and is now offered to employees of all financial institutions, as part of its professional diploma in SME credit.

At Ulster Bank we understand the agrifood sector and are committed to supporting both individuals and enterprises, from farmyards to boardrooms, in a focused, structured and strategic manner. We also recognise that lending must be responsible and based fully on a farmer's ability to generate cash flow to repay debt. We take a long-term view of agricultural lending, recognising the inherent volatility in farming.

Through our close interactions with all stakeholders in the dairy industry, we realised in 2014 that dairy farmers might face some cash flow challenges in 2015 and 2016 owing to a low milk price. This coincided with a time in which many dairy farmers were expanding, post-milk quota abolition. In response we developed the Ulster Bank Dairy Farmer Toolkit as part of our proactive support for our dairy farm customers. The toolkit provides solutions for farmers with options such as increased working capital facilities, an interest-only option, or a combination of both, depending on individual circumstances. The dairy sector which has attracted most commentary is not the only farming sector in Ireland to experience cash flow difficulties. The pig and tillage sectors have struggled with low prices for a number of years, while both the beef and mushroom sectors have been impacted on in recent times by the uncertainty caused following the referendum on the United Kingdom's membership of the European Union. Ulster Bank offers support and solutions to all of its customers during periods of pressure, once the underlying core business is sustainable into the future.

The increased volatility evident in the agriculture sector in the past few years due to weather, price or unexpected individual on-farm challenges is a reality that the sector must learn to manage. Farmers must continue to improve on-farm efficiencies and competitiveness to survive the income cycles which are becoming the norm. At Ulster Bank we believe the production and utilisation of grass on livestock farms drives efficiency. We introduced a pasture loan in 2015, which provides finance for grazing infrastructure, drainage, re-seeding and soil fertility measures. We continually encourage all farmers to analyse their costs of production, compare them to those of their peers and adopt best technologies. The preparation and utilisation of a cash flow budget are also key tools required to manage a farm business effectively. Ulster Bank believes all farmers need to continue to develop a broad range of skills. Greater understanding of technical efficiency, people management and business skills are required to successfully develop farming operations in this increasingly uncertain environment.

As part of our meaningful help and support measures for farm families we ran regional seminars in Limerick and Donegal entitled, Building Capabilities on Farms. The seminars brought industry experts and sectoral intermediaries together to enable the attending farmers to discuss and seek advice on solutions and strategies to help to address volatility in their businesses. We had representatives from Pieta House and Mental Health Ireland at both events to recognise and support the need for mental well-being, as well as financial well-being, on farms. They stressed the importance of talking, listening and seeking regular downtime from the stresses and strains of running a farm business.

At Ulster Bank we continually provide additional help and solutions for our customers through the publication of articles, participation in various fora and conferences, as well as sponsoring some key agricultural events. In July Ulster Bank will partner with Teagasc Moorepark to support its biannual open day. The theme of the event, Resilient Technologies, will provide dairy farmers with the opportunity to view and discuss the latest developments in key dairy technologies to help them to manage present day challenges. These factors are firmly embedded in the Ulster Bank business and credit strategy for the farm sector.

Through the SBCI agricultural cash flow support loan scheme, Ulster Bank was allocated €25 million. Approximately €6 million of this fund has been drawn-down, with an average loan size of more than €50,000. Based on our drawdown figures to date, we anticipate that 500 of our customers will benefit from the scheme. An initial analysis of the loans also indicates that they mirror Ulster Bank's geography and farm sector concentration profile. The majority of funds were allocated to assist with working capital in 2017. There was strong demand to assist with the purchase of trading stock, fertiliser and feed. The funds will be used as an alternative by farmers to merchant credit. Our customers also sought funds to replenish working capital previously used to support capital expenditure on farms. There were also funds requested to clear super levy, revenue and merchant credit bills. The vast majority of applications received through the scheme were approved. However, a small number of applications were declined owing to the farm business being in financial difficulty or because the purpose of the loan did not meet the scheme eligibility criteria.

Where the purpose of the loan did not fit the eligibility requirements but repayment capacity was evident, we provided support through our other business products. There were also requests to refinance existing term debt and for new investment which were not permitted under the scheme.

With regard to the term of the loans provided by Ulster Bank, we aimed to match the tenure with the purpose of the loan, within the confines of the scheme. For example, a farmer who had bought weanlings in the spring of 2017 with the purpose of selling them as stores received a loan for 12 months, while a farmer who had financed the partial construction of a milking parlour from working capital in 2014 was subsequently able to finance it over a six-year period, the maximum term allowed under the SBCI scheme.

I reiterate that Ulster Bank is committed to the agrifood and farming sectors. Our aim is to partner with farming businesses to enable them to grow and to continue to play our part in supporting the agriculture sector through the difficulties that arise. We have developed flexible solutions for our customers, including the Dairy Farmer Toolkit, pasture loans, as well as participating in this scheme. Ulster Bank looks forward to further engagement and collaboration with all stakeholders in the industry to consider a range of options to address the fundamental difficulties facing the sector.

I thank the Chairman and members for affording Ulster Bank the opportunity to address the committee. Mr. Cullen and I will be happy to address questions members may have for us.