30th Sep 2014 06:55
LONDON (Alliance News) - Royal Bank of Scotland Group PLC Tuesday said it expects to "significantly outperform" its previous impairment guidance for the full year, supported by an improvement in economic conditions and asset prices in its key markets, including Ireland, though it issued a warning on third-quarter corporate and institutional banking revenue.
RBS had previously guided about GBP1.0 billion in total impairments for the full year, but gave no specific new guidance.
The group, which is 80% owned by the UK government following its bailout in the wake of the financial crisis, said the improved economic climate supported a strong operating performance by RBS Capital Resolution (RCR), the 'bad bank' it set up to run down capital intensive assets. RBS said it expects RCR to record net impairment provision releases in the region of GBP500.0 million in the third quarter.
However, RBS warned that RCR's future overall costs and speed of wind-down remain subject to significant potential volatility.
"The potential exists, if market conditions remain favourable, for RCR to incur limited future impairments and disposal losses, and an accelerated timetable to achieve its wind-down goals," RBS said in a statement.
In addition to the improved performance within RCR, RBS said that rising Irish residential property prices combined with proactive debt management has resulted in lower arrears in Ulster, excluding RCR, within its personal and business banking division. It now expects Ulster to record net provision releases in the region of GBP300.0 million in the third quarter. Similarly to the case of RCR, RBS said the potential exists for further releases, depending on if market conditions continue to improve.
RBS also said there has been "an absence of large one-off impairments and lower levels of new non-performing loans" in the rest of its business during the third quarter
Despite the improved impairments outlook, RBS said corporate and institutional banking revenue has been weaker than expected in the third quarter, without giving further detail.
The bank said it has disposed of about EUR9.0 billion legacy available-for-sale debt securities, citing improved market prices. The disposals generated a loss of around GBP200.0 million in centre revenue, but said it expects the transactions to moderately improve its capital ratios.
The bank reiterated that uncertainties remain, particularly relating to conduct and litigation matters.
By Samuel Agini; [email protected]; @samuelagini
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
RBS.L