RBS shrugs off recent slowdown in lending

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The Independent Online

Royal Bank of Scotland yesterday delivered an upbeat outlook for next year despite a slowdown in consumer lending and predicted the bank was on course for a 10.5 per cent rise in profits this year. It also reassured investors about the impact of new accounting standards on its earnings next year.

Royal Bank of Scotland yesterday delivered an upbeat outlook for next year despite a slowdown in consumer lending and predicted the bank was on course for a 10.5 per cent rise in profits this year. It also reassured investors about the impact of new accounting standards on its earnings next year.

Sir Fred Goodwin, the chief executive, said: "We are very confident that we'll meet market expectations ... with strong income growth across all businesses and improving efficiency and credit quality."

Analysts are predicting 2004 pre-tax profits of about £7.9bn, excluding goodwill and integration costs, up from £7.15bn last year.

The new International Financial Reporting Standards that take effect in January will reduce underlying 2004 earnings per share by between 2 and 3 per cent, RBS said. That is less than the 7 per cent drop predicted by its smaller rival Barclays.

RBS also said basic earnings per share would rise by more than 10 per cent as goodwill on acquisitions would no longer be amortised.

RBS's trading statement compared favourably with that of Barclays, which two weeks ago surprised the market by announcing rising costs and a flat performance at its UK retail bank, with margins under pressure from rising interest rates.

Consumer appetite for debt in Britain has cooled after five interest rate rises, which boosted borrowing costs by one-third in the past year.

Sir Fred admitted that there were "signs of a modest easing in consumer lending", but pointed out that "it is quite a small part of our business". Consumer lending accounts for less than 10 per cent of the group. Meanwhile, large corporate lending has picked up, he said.

Analysts said the comments confirmed the strong income trends seen in the first half.

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