RBS ‘could struggle to meet lending goals’

Author: By Russell Lynch, Press Association

RBS – 70 per cent owned by the taxpayer – has agreed to make an extra £25
billion available to businesses and homeowners as a condition of state

The NatWest owner has boosted mortgage loans but fewer banks have withdrawn
from business lending and a gap in the market has not emerged, chief
executive Stephen Hester said.

The bank’s comments come after Bank of England figures this week showed a
£14.7 billion fall in loans to businesses between April and June.

Mr Hester said RBS was “open for business”, but added: “Just as
we have lent money, a lot of people have paid us back.”

While the firm made £28.6 billion in gross loans to business during the first
half, net lending was down £7.3 billion because customers paid back more.

The firm is also facing the challenge of finding enough creditworthy borrowers
ready to take on debt when their own business prospects and customer demand
is weaker.

Total UK business lending fell 4 per cent to £155.1 billion during the first
half of the year, the bank’s results showed.

Loan applications from small business were down 37 per cent, although the bank
still made 100,000 business loans with an 85 per cent acceptance rate among
smaller firms.

But Mr Hester added: “Demand has been comparatively muted, with companies
cutting inventories and expansion plans and reducing their bank borrowing

“In the absence of a more general recovery in borrowing appetite the
targets will remain challenging.”

Despite claims that banks were stinging customers with increased charges, RBS
added that average interest rates on loans were at half the level of a year
earlier, while 94 per cent of customers who renewed overdrafts did so at the
same margin or lower.

RBS currently has between 20-30 per cent of the UK small business banking
market, but could also face calls from the European Union to shrink its
franchise to gain state aid approval. The bank is in talks to prevent
disruption to customers.

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