RBS Defends Record on New Loans
APRIL 28, 2010, 9:01 A.M. ET
LONDON—Royal Bank of Scotland Group PLC "cannot invent credit demand" in a government-driven effort to help pull the U.K. economy out of recession by lending more to consumers and businesses, Chairman Philip Hampton said Wednesday.
Hampton, in a statement before the bank's annual general meeting, said RBS will stick to its commitment made to the government last month to put GBP50 billion of new funds on the table, but "whether we can actually lend that amount will depend on both the growth of the economy and our customers' demand for more credit," Hampton said.
"We need to have our eyes wide open about the reality of credit demand as we pull out of the recession. The political imperative of stretching targets is understood, but although we will make the money available, we cannot invent credit demand," he said.
RBS is 83%-owned by the government after a series of bail-outs in 2008 and 2009. It has been under pressure to meet government targets for lending, but failed to fully achieve its 2009 targets because of what it deemed insufficient demand from qualified borrowers.
Reporting on the bank's prospects for this year, Hampton said loan and credit impairments in its non-core units are likely to remain high in 2010, and will once again weigh on operating profit.
But he said RBS now represents an "opportunity" not a problem to the U.K. government and other shareholders, as the economy improves.
Addressing remuneration at the bank--a hot topic for shareholders and U.K. taxpayers in light of RBS' losses in 2008 and 2009--Hampton said it needs to "strike a balance" between public concerns and the needs of its business.
Shareholders will vote Wednesday on revisions to RBS' remuneration policy that will replace two existing award programs for executives with a new long-term incentive plan.
The bank confirmed it will raise the target price the shares must achieve before a portion of the incentives pay out, without saying what it would be. The target had been set earlier this year at 50 pence, lower than the current 55-pence price.
Write to Margot Patrick at margot.patrick@dowjones.com
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