RBS reports buoyant activity in key areas

RBS HAS benefited from “buoyant” corporate banking activity in its key markets since the turn of the year, its chairman revealed yesterday, offering a rare glimpse of optimism for the stricken bank after its near-collapse last year.

Philip Hampton, in an interview with the Financial Times, also flagged other “positives” in 2009 for the part-nationalised bank, including increased business as a result of the rise in corporate debt issuance and equity underwriting.

Mr Hampton’s disclosure follows Barclays, its UK rival, which this week announced that it had enjoyed a “strong start” to the year. Citigroup and Bank of America have also recently issued positive trading statements for 2009. “Activity in wholesale banking has been quite buoyant in the opening months of 2009,” he said. However, he cautioned it was too soon to assess the full impact of the credit crisis on the real economy. “It is pretty brave to call a turn.”

People close to RBS added that any improvement in revenues could be undermined by further deterioration in the bank’s balance sheet, which was recently reinforced when it insured £325 billion in toxic assets with the British government.

In the financial prospectus recently sent to shareholders the bank warned it would be “hazardous” to make any forecast, saying that 2009 would be a “very tough year for the world economy”. The relatively upbeat assessment by the RBS chairman may come as some relief to British taxpayers, who could end up holding a 95 per cent economic stake in the bank. Ministers still hope the bank rescue could yield a profit for the government.

RBS owns Ulster Bank and First Active in the Irish market but is cutting 750 jobs by subsuming First Active into Ulster.

However, the bank is still dogged by grim publicity surrounding its recent past, including the disclosure yesterday that Fred Goodwin, the former chief executive, had pocketed an advance of £2.7 million on his £700,000 annual pension.

Lord Myners, City minister, said the bank had agreed to pay the tax on this advance, although Mr Goodwin may now give it back.

The minister, grilled by MPs, admitted he had not “sought information” about the size of the pension or whether the former chief executive was legally entitled to it.

He suggested that the former chief executive was still considering whether to give up part of his controversial pension.

He said that one of his early moves in the job was to call Mr Goodwin and suggest that he might want to make a “gesture”. Mr Hampton added: “Fred has been mulling that over.”

Mr Hampton was speaking in Hong Kong, mid-way through a week-long tour of Asia in which he is visiting China, Singapore and India. – (Financial Times service)