The Royal Bank of Scotland’s Lending!

by Mark Johnston

The Royal Bank of Scotland’s Lending!

The Royal bank of Scotland (RBS) required a £45.5 billion public funded bailout back in October 2008, meaning that the government now own 84 per cent of the bank.

In recent months it seems that the current strategy for returning RBS to the private sector has failed and many MP’s therefore believe that the government should consider the possibility of splitting the lender into a good and bad bank.

The Parliamentary Commission on Banking Standards said of this particular strategy “In the present economic and political climate, governments will continue to be tempted to influence or intervene in the banks.”

However at the current time the government has ruled out a broad investigation in to whether the Royal Bank of Scotland (RBS) should be broken up and sold off in smaller component parts to foster more competition in the banking sector”.

Many experts are pleased with this particular decision as they feel it would cause uncertainty and disruption for customers, creditors and staff. This would risk undoing much of the good work that RBS has done in strengthening the bank in recent years.

The Royal bank of Scotland’s 2012 annual results revealed that they increased gross mortgage lending by 9.6 per cent to £16 billion, which is an increase of £1.4 billion reported in 2011.

However in the first quarter of 2013 the Royal Bank of Scotland (RBS) advanced around £3.6 billion worth of mortgages to 28,000 UK home owner, which is down 10 per cent in value on the £4 billion of lending over the same period a year earlier.

Stephen Hester RBS group chief executive said  “We are seeing the start of a pick up in loan demand and have a strong surplus of funds ready and available to fully support economic recovery.”

This said it appears that the profit made by the UK’s five major banks, which include the Royal bank of Scotland, last year could be cancelled out by the cost of fines and other charges for past mistakes.

A report by audit firm KPMG suggests that the biggest UK banks actually saw core profits increase by 45 per cent, meaning combined core profits of £31.5 billion,  in 2012, but these gains were erased by factors such as the payment protection insurance (PP)I and London Interbank Offered Rate (LIBOR) scandals which saw the banks having to set aside redress.

Figures have revealed that Payment Protection Insurance (PPI) claims alone cost the banks £7.4 billion in total which is up from £5.7 billion in 2011.

Also according to data from the Financial Ombudsman Service (FOS) the Bank of Scotland had more complaints about its mortgages than any other financial institution.

So it seems that all in all in terms of reputations, 2012 was a dire year. This is why it is so important for lenders and the Royal bank of Scotland in particular, to address cultural and ethical perceptions and issues, as restoring customer trust is critical.

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