Royal Bank of Scotland could benefit to the tune of billions

Published on Sunday 28 September 2008 22:31

ROYAL Bank of Scotland is to be one of the biggest beneficiaries of the economic bail-out in the US due to its significant business interests across the Atlantic. The bank will be able to offload billions of dollars worth of dodgy loans and assets as part of the Troubled Asset Relief Programme (TARP).

It was expected that shares in the Edinburgh-based bank would rally this morning on the back of the news, a welcome boost for the financial giant, which has seen its shares fall 71 per cent from their peak before the credit crunch hit last year to a Friday close of 205p.

US Treasury Secretary Henry Paulson last week revealed that foreign banks would be likely to be able to unload bad financial assets as part of the $700 billion (381 billion) proposal aimed at restoring order during a devastating financial crisis.

RBS first gained a foothold in the US with its 1988 acquisition of Rhode Island-headquartered Citizens Bank, but it also owns other financial institutions in Connecticut – Greenwich NatWest – and Ohio, where it has Charter One.

Its US-based business entitles it to hand over billions of dollars of loans tainted by subprime lending to the US government.

Colin McLean, chief executive of SVM Asset Management in Edinburgh, said the amount of assets that RBS could get rid of under the scheme could amount to billions.

RBS has outstanding loans of $1.5 trillion in total. It has taken a near-6bn write-down this year on its billions of pounds worth of credit crunch-related assets, while rivals Barclays and HBOS suffered write-downs of 2 billion and 1.1 billion respectively.

The details of the US rescue bill are set to be debated on the floor of the US House of Representatives today.