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The same day the name RBS was sent to the annals of financial history, the head of the UK’s largest business lender warned that, while the painful memories of the last major financial crisis had faded, the true scope of a new and more serious threat to thousands of companies was emerging.
Alison Rose, CEO of the renowned Natwest Group, said: “Clearly there are difficult times ahead. Not all companies will survive and there will be losses.”
We had an idea of the potential scale of losses earlier this year when RBS (as it was) reported a nine-fold (833%) increase in the amount of money it set aside for bad loans compared to the same period last year. .
New accounting standards require companies to make their best estimate of future bad loans, so RBS’s best guess in the first quarter of this year was that bad loans would explode. We will receive an update on your view next week.
Since that time, RBS has loaned £ 10 billion under various government schemes to companies that they normally would not have done had it not been for government guarantees, the vast majority of which were 100%.
However, as Alison Rose wanted to emphasize, those guarantees are for the lender, not the borrower.
If RBS predicts that the loan delinquency rate increased nine times in loans that the bank felt comfortable doing without collateral, how much higher will it be when that government support means that normal loan checks were sped up or even effectively discarded ?
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Since these loans are guaranteed, the financial problem is mainly from the government (and therefore the taxpayer), but these are loans, not grants, and Alison Rose accepted that street banks will be the ones who will knock on the door for refund.
“It is a very important point that we have made to companies that are 100% responsible for the refund. We will get involved in collecting that money because they will have to return it, but we will do it in a very considerate and considerate way.” “He added that many companies had secured the funds, but many had not yet spent them.
RBS RIP?
The decade or so since the last crisis was the most painful in the nearly 300-year history of a bank that went from being a strong and trustworthy and trustworthy Royal Bank of Scotland (a brand that its branches will retain in Scotland) to a word for reckless expansion, arrogant leadership and, in some cases, the brutal and unethical treatment of their small business clients after the accident.
Ms. Rose is determined to complete a transformation from that to a “financially sustainable bank with a purpose that works for all her stakeholders.”
The name change can help to close the door on a horrible decade for a bank whose ten-year loss totaled £ 60 billion, eliminating an injection of £ 46 billion in taxpayer money and more.
Shares of TBFKARBS (the bank formerly known as RBS), or Natwest Group, are priced at a quarter of the value at which the taxpayer purchased their shares.
We will probably never get that money back. That doesn’t mean it was wrong. A bankruptcy of a bank whose assets were worth more than the entire UK economy would have brought that economy to ruin with it.
Rose insists that the bank will not airbrush events since 2009 from her corporate memory: “We don’t want to forget the past, it is important that we remember those lessons”
New name. New crisis
