More Losses for RBS

by Mark Johnston

According to leading analysts the Royal bank of Scotland (RBS) is one of the most ‘vulnerable’ banks in Europe.

The latest figures from the Royal bank of Scotland (RBS) have shown that their share of the mortgage market has almost halved in the past year. The lender had a14% share of gross mortgage lending in the third quarter of 2010 however this has now fallen to just an 8% share in the third quarter of 2011.

The bank states that gross lending totalled £4 billion in the three months leading up to September 2011, which was 5% up from the previous three months, but down 25% on the same period last year. The lender has revealed a £666 million loss on its property loans.

In light of this the RBS has now decided to look in to their new build policy, as there are many first time buyers looking in to this market. New build and first time buyers are seen as the leverage points in the market at the moment. The buy to let sector has also seen a boom over the last year or so and the RBS believes this is another sector they could and should better support.

Moray McDonald , the Royal Bank of Scotland’s (RBS) category director fro home and lifestyle stated “ while we do a relatively good job of helping first time buyers, one of the things on my to do list is to look again at our lending policy on new build. I am waking up to how much variation there is in the new build market. There is more we could do to recognise that diversity and at the moment I would only give ourselves five out of ten for our new build lending”.

The Royal Banking of Scotland have reduced their maximum loan to value (LTV) criteria for new builds to 80% for residential mortgages, down from 90% and also 65% for the buy to let investors, down from 75%.

Many experts have warned that along with Lloyds TSB and Barclays, RBS could face further losses on property loans of up to £20 billion as loans that have been extended begin to mature.

With all these reports of loss it is no wonder that the bank has decided to look in to other avenues of the mortgage market.

Many other reports have also shown that the Royal Bank of Scotland is expected to announce 2000 job losses after a reported 6 month loss of around £794 million, compared to a £1.2 billion profit last year.

Chief executive of the Royal bank of Scotland, Stephen Hester said “we are getting risk down; the bad assets that have been dogging us from past years are coming down”. He added that ‘on going problems in world banking created head winds which affected banks in different ways’.

The turmoil on the market at the moment which includes the euro zone debt crisis has seen RBS shares plummet. The state backed bank is already 83% owned by the taxpayer and are likely to face full nationalisation in the near future.

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