RBS increases lending to businesses in Q1

Although RBS saw a run-down in lending to non-core business, net lending by RBS to core businesses and households for the first quarter of 2013 increased by £929m. This figure includes invoice and asset financing by Lombard, which is not included in Bank of England Funding for Lending (FLS) figures but will be in future quarters.

Peter Ibbetson, Chairman of Small Business Banking, said: “RBS has increased lending to the real economy by nearly £1bn in Q1 2013, which includes a £600m increase in our business lending – our strongest performance since the scheme launched.

“We continue to punch above our weight in terms of lending to UK businesses – we have helped over 22,000 SME customers through the Funding for Lending scheme, and we’re making more credit available to UK SMEs than any other bank.”

Bank of England FLS figures for the first quarter show that net lending by the 13 FLS participating banks was -£0.3bn for the first three months of the year. Its reported net lending figure for RBS was -£1.62bn, but this figure includes planned loan run offs in commercial property and other non core businesses of £2.4bn. These offset the positive net lending to target core customers.

  Peter Ibbetson: RBS continues to  "punch above our weight in terms of lending to UK businesses"

Non core includes a range of businesses and asset portfolios, primarily from Global Banking and Markets, linked to proprietary trading, and includes higher risk profile and illiquid asset portfolios and businesses that the Group has concluded do not fit its strategy for restructuring.

Paul Fisher, Executive Director for Markets at the Bank of England, acknowledged the effect  of the run down in non core lending in reducing net lending figures: “The picture of flat lending growth overall is broadly as expected at this stage reflecting the reduction in some legacy portfolios being roughly offset in aggregate by expanding new lending. The plans of the FLS participants suggest that net lending volumes will pick up gradually through the remainder of 2013.”

The Bank of England said that since the start of 2012, FLS lending to individuals  has typically been positive for most banks, while net lending to businesses has mostly been negative.

However RBS saw its core net lending to businesses, including asset and invoice finance, increase by £1.515bn.

Ibbetson added: “We were the first bank to introduce reduced borrowing costs for businesses through the Government’s Funding for Lending Scheme. So far we’ve allocated over £3.6bn of discounted loans to over 22,000 SME customers – saving them approximately £70m. We used the scheme to offer our best terms ever on SME loans, saving £3,000 on the average loan. Smaller businesses receive bigger discounts, with the cost of fixed rate loans falling below 3%.”

The Funding for Lending Scheme is helping to breed confidence amongst businesses, he said. According to the Business Finance Monitor, awareness of the scheme is growing and making businesses more likely to approach their bank for finance.

The Bank of England announced an extension to the FLS in April with three main objectives:

• to give banks and building societies confidence that funding for lending to the UK real economy will be available on reasonable terms until January 2015
• to increase the incentive for banks to lend to SMEs both this year and next
• and to include lending involving certain non-bank providers of credit – invoice and asset financing – which play an important role in providing finance to the real economy

Disclaimer

This material is published by The Royal Bank of Scotland plc (“RBS”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by RBS and RBS makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the RBS Group’s Group Economics Department, as of this date and are subject to change without notice. The classification of this document is PUBLIC.  © Copyright 2012 The Royal Bank of Scotland plc. All rights reserved.