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Banking industry

Royal Bank of Scotland Reassures Investors on UK Consumer Debt Exposure

Strategic Insights

— 1 min read

Royal Bank of Scotland's (RBS) chief executive, Sir Fred Goodwin, has provided a reassuring update on the bank's exposure to UK consumer bad debts, citing a return to more normal levels of credit card arrears. The bank has also reported strong revenue growth from corporate banking and its US operations, with a significant presence in Yorkshire. Despite some slowing in UK retail growth, RBS's profits growth is on track to match last year's 12 percent increase. The bank's acquisition plans have been ruled out, with Sir Fred stating that there are no imminent deals in Europe or the US.

Key Takeaways:

  • RBS has reported a return to more normal levels of credit card arrears after record lows, with retail provisions for bad debts increasing but not causing alarm.
  • The bank's underlying performance is continuing to perform along expected lines, with diversity coming into play from corporate banking and the US operations.
  • Revenue growth from corporate banking and the Citizens business in the US was strong, although growth in UK retail, which includes NatWest, has slowed due to consumers moving away from unsecured borrowing.
  • David Ridland of Britannic Asset Management commented that the message from RBS reiterates the diversity of income and multiple income streams that the bank has, offsetting the consumer credit environment.
  • RBS has a significant presence in Yorkshire, employing 4,400 people in Leeds, with another 2,200 in Doncaster and 1,600 in Sheffield.
  • The bank makes half its profit from corporate banking and financial markets, with lending to large companies picking up and corporate bad debt provisions expected to fall in the first half.
  • RBS's US business, which accounts for about a quarter of profit, is performing well as the American economy expands.

Statistics:

  • RBS's profits growth is on track to increase by 12 percent year-over-year.
  • Retail provisions for bad debts have increased, but remain at a level that is not causing alarm.
  • Credit card arrears have returned to more normal levels after a period of record lows.
  • 4,400 people are employed by RBS in Leeds, with another 2,200 in Doncaster and 1,600 in Sheffield.
  • The bank's US business accounts for about a quarter of its profit.

Sources:

  • "Royal Bank of Scotland Gains on Trading Update," Bloomberg.
  • "RBS: Consumer Credit Envs Has Not Changed," Morningstar.

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