Sir Fred Goodwin, the chief executive of Royal Bank of Scotland, yesterday dismissed criticism of Britain's bankruptcy legislation as his company shone a ray of light through the dark clouds over British banking,
RBS shares surged, closing up 76p at 1,916p as he pledged to beat the City's profit forecasts as a result of a rise in corporate lending and falling bad debts.
On the mounting controversy surrounding individual voluntary arrangements - an increasingly popular alternative to bankruptcy that HSBC has sharply criticised - Sir Fred said: "I think IVAs, if used properly, can work to everyone's advantage."
IVAs see debtors agreeing a repayment plan that leaves them debt-free in five years. They usually require banks to write off a substantial proportion of their customers' debts.
But Sir Fred denied they were an easy way out: "IVAs are used by people in financial difficulty and no one actually wants to find themselves in financial difficulty. What it does do is bring resolution to a problem. Yes, it has grown but you would expect it to - everything to do with consumer lending has been at record levels."
The company's upbeat trading statement yesterday was in sharp contrast to the gloom from Barclays and HSBC, both of which complained that there was no end in sight to the rising tide of bad loans and record levels of insolvencies. Sir Fred said the situation at RBS was better because it was not involved in the so-called "sub-prime" market that deals with people on low credit ratings and who tend to find it difficult to repay debt when times get tough.
He said: "The rate of growth [in bad debt] is moderating for us... We do now see an end in sight."
He also said consumers had "drawn in their horns" and were now repaying more than they were borrowing. However, the slowdown in lending was being offset by a sharp rise in the sale of savings products.
Royal Bank particularly benefited from success at its Corporate Markets division. The bank has leapfrogged Citigroup to become the largest arranger of syndicated loans in Europe. RBS has helped to arrange £52bn of the loans, used to finance buyouts by private equity firms, so far this year.
Sir Fred said that Hector Sants, the Financial Services Authority managing director, had been "right to raise questions and challenge market practice" on syndicated loans in a recent paper voicing fears over credit quality and predicting a major corporate failure.
However, he said: "We are the biggest participant in the syndicated market but we pass it on which means we don't hold much - about 14 per cent. There are a lot of private equity deals being done and there is good demand. We could easily lower the proportion we hold."
He reported "strong growth" across the range of corporate markets in which the bank operates. The bank also said its US Citizens business was "growing" loan and deposit volumes, but this was being offset by lower margins.
Sir Fred said the RBS board was considering a rise in the dividend, further share buybacks, or a combination of the two.
James Eden, banking analyst at Dresdner Kleinwort Wasserstein, raised his price target on the shares, but said he still believed "the Fred factor" was holding it back compared to its peers.
He said: "There is a management discount in the shares." But he added: "I'm as sure as I have ever been that Fred cares more about shareholder value creation than building a legacy."
He urged Sir Fred to back a big dividend rise and share buyback.