RBS sets aside £800m to pay for bad loans as profit is dragged down almost 50% in the coronavirus slump
Royal Bank of Scotland has set aside £802million to prepare for the coronavirus slump – taking provisions earmarked by the big five banks to cover bad loans to £6.9billion this week.
RBS, which is changing its name to Natwest later this year, said the loss provisions dragged profit down by almost 50 per cent to £519million in the first three months of 2020.
However, the bank set aside less than some of its rivals to deal with borrowers who are expected to become unable to repay their loans due to coronavirus.
RBS, which is changing its name to Natwest later this year, said the loss provisions dragged profit down by almost 50pc to £519m in the first three months of 2020
Barclays earlier this week siphoned off £2.1billion, while Lloyds pencilled in £1.4billion.
Alison Rose, RBS’s chief executive, said this was partly due to the fact that the bank has fewer unsecured loans on its book, such as credit card lending and personal loans.
But the bank’s economic outlook is also slightly more optimistic than Lloyds’, as RBS said it was predicting a 4.3 per cent contraction in the economy this year rather than 5 per cent.
RBS has been the most prolific lender to smaller businesses under the Government’s Coronavirus Business Interruption Loan Scheme (CBILS), designed to give desperate firms a lifeline during the pandemic. It has handed out £1.6billion to 8,292 businesses, or around 40 per cent of the total value.
Rose said she realised the importance of CBILS in helping businesses, and was quick to shift 100 extra staff over to work on processing applications.
Many lenders have been slow to put CBILS into action due to fears too many borrowers will go bust during the pandemic, leaving the banks on the hook for 20 per cent of all losses.
She said: ‘There’s a huge amount of uncertainty and we’ve already taken an impairment. But we’re lending to existing customers, and within our risk appetite.’