RBS chief to rein in loans on property

Published on Wednesday 17 June 2009 10:13

ROYAL Bank of Scotland boss Stephen Hester has said the bank will never again lend as much for property as it did in recent years.

The Edinburgh-based bank's chief executive also admitted that losses on property loans could be higher than previously thought.

Speaking at the British Property Federation annual conference in London, he said it could take three to five years for the excessive level of property lending to work its way out of RBS' loan books.

"We will never lend as much to real estate as we did," he said.

He also indicated that he believed the economy had taken a significant turn. "We are not yet going up but the pace of decline has moderated substantially," he said.

From the bank's perspective, he said there were no signs of green shoots of recovery yet, but there had been improvements.

The former chief executive of British Land, who took over from Sir Fred Goodwin at RBS, told delegates that government action had improved the outlook, but a recovery would depend on a fall in demand for credit.

"The world has turned a very important corner and we have moved from an extraordinary case of fear of unprecedented financial meltdown to a conventional recession," Mr Hester said.

"The banking system can support demand for credit, but demand for credit should be falling. Borrowers have to save more and borrow less."