RBS will miss £16bn lending target

Friday, 06 November 2009 12:00

Royal Bank of Scotland (RBS) has admitted it will miss the £16 billion lending target to consumers and businesses set by the government.

As part of the deal with RBS to insure the bank against further losses, the government demanded the bank make an additional £25 billion available for lending, with £9 billion for mortgage lending and £16 billion for businesses.

However, RBS said it is unlikely to meet this target - because customers are cutting back on their borrowing and demand for loans has slumped.

"As is normal in recessions, our customers are generally seeking to repair their balance sheets, not to increase borrowing," RBS said in its third quarter report.

"As a result, the demand for our lending is muted, especially from business customers.

"Increased borrowing is not the route to sustainable recovery," the bank added.

Demand for mortgages is still strong, however, and net mortgage lending for the year to date totals £8.6 billion, the banks said. RBS added the bank is on target to exceed the £9 billion mortgage lending commitment.

Both small and large businesses are seeking to pay back their loans as they cut their debt, RBS said.

RBS, which is set to be 84 per cent owned by the government, swung to a third-quarter attributable net loss of £1.8 billion after loan impairments rose.

However, chief executive Stephen Hester was cautiously optimistic in his outlook and said core businesses were performing as expected.

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