RBS forbearance hits £5bn

Credit Strategy, 21.04.17


During 2016, the bank saw £834m of new “flows” of personal banking products into forbearance.


As for bad debt levels in more specific elements of consumer lending, RBS wrote off three times as much card debt as it did in 2015, from £10m to £31m in 2016.


RBS also declared a slight increase in its impairment charges against personal advances, including personal loans and overdrafts, rising from £69m in 2015 to £84m in 2016.


As for general performance across the group, RBS recorded a £4bn loss again this. Chief executive Ross McEwan said this reflected charges for outstanding litigation and conduct costs as well as costs associated with restructuring the bank.


RBS’s litigation and conduct costs increased 65 percent year-on-year, from £3.5bn in 2015 to £5.8bn in 2016.


McEwan said the financial impact of these costs is a “difficult but necessary step” in working through the bank’s legacy issues.


He said: “These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis.”


In November 2016, the bank estimated it would spend £400m to refund SMEs that claimed they were pushed into administration by the bank’s Global Restructuring Group (GRG) between 2008 and 2013.


James Hayward, chief executive of RGL Management Limited (RGL), the team representing these SMEs, said: “The bank is offering a derisory self-administered compensation scheme. We are looking forward to suing RBS this year on behalf of our claimants.”


RBS spent £2.1bn on restructuring costs for the full year of 2016, a slight decrease compared to last year’s total of £2.9bn.


McEwan said he aims to have RBS back in profit by 2018, representing a significant step towards being able to start repaying UK taxpayers for their support.


He said: “(This is) assuming we can conclude our issues on residential mortgage-backed securities this year and resolve our residual state aid obligations.”