Terry Murden: RBS is at last taming the toxic assets beast

The sale of the aircraft leasing business for £4.7 billion to the Japanese bank Sumitomo Mitsui Financial Group, announced on Monday night, was the biggest single disposal among the bank’s unwanted or “non-core” assets.

As such it marks a milestone in the turnaround story. The value of assets in this division is now below £100bn – somewhere around £96bn – a sharp reduction from the £258bn mountain of complex instruments and trading positions that it identified as no longer required in 2009, in the immediate aftermath of the bail-out.

If Rory Cullinan, who heads up the non-core disposals programme, is pleased with progress to date, which has been at a rate of about £1bn a week, then he’s not showing it. Speaking to me yesterday he was quick to point out that, despite shifting such a heavy load and reducing losses over that period from £14.5bn to £2.9bn, there is a lot of work still ahead.

“£100bn is still a lot of assets,” he declares. But he also points out that the bank got the process under way early. Other banks, notably in Europe, will be trying to sell into an increasingly tough market. Despite the downturn and the volume of assets being offloaded, Cullinan has refused to accept below-market valuations and the aviation business was sold at a £195 million profit. Nor was the highest bid the only condition to agreeing a sale. He also wanted certainty of completion and in the Japanese he has tapped into what is seen as a market of eager buyers of western assets.

There is some satisfaction at Gogarburn that the toxic beast has now been tamed but it wants the world to know that selling its biggest asset should not be seen in isolation in the on-going process of making the bank safer.

The winding down of the non-core book has involved the disposal or near-disposal (when the Romanian Banking operation is sold) of 31 businesses while the rest is made up largely of loans. The disposals have included its 4.3 per cent stake in Bank of China and retail and commercial businesses in China, Hong Kong, Indonesia, Singapore and Taiwan and investment banking operations in the Philippines, Taiwan and Vietnam.

Other non-core sales have included the Linea Directa (Direct Line) insurance business in Spain; RBS Asset Management; Sempra (the metals, oil and European energy trading arm); invoice finance operations in France and German; and the 300 British branches sold to Santander.

The bank has also quit small-scale operations in the likes of Argentina, Chile, India, Kazakhstan, Pakistan, India, United Arab Emirates and Venezuela.

It is likely that the final £40bn will be hard to shift, but will account for less than 5 per cent of the balance sheet. The progress made so far also represents a victory of sorts for a bank badly in need of a winning streak.

Swinney plan answers some EZ criticisms

the unveiling of the next generation enterprise zones has been long coming and should open up an interesting difference of policy north and south of the Border.

While those re-introduced in England will follow the established model based on specific locations, the Scottish “enterprise areas” will be more sector-specific.

Details are yet to be announced but the incentives are likely to be similar in both cases, based largely on various tax and rates reliefs. But John Swinney’s plans will introduce incentives into clearly-identified growth sectors of the economy, such as bioscience and renewables, rather than focus merely on regeneration of economically-deprived locations.

It could be argued that these concepts are not mutually exclusive, but they may appeal to different groups of investors and the Scottish proposal brings a new dimension into a programme which has had a patchy track record. The old EZs were accused of merely luring jobs from high-cost areas, a pattern which the finance secretary will be anxious to avoid.

In the Scottish case, by defining the concept around identifiable sectors as well as locations, he is highlighting those which are regarded as key to the wider growth strategy. As such, the plan should provide further stimulus to a campaign to attract investment.