ROYAL Bank of Scotland will clear a crucial hurdle in its recovery today when it exits the Asset Protection Scheme.
It’s a move that should be universally welcomed. Not only will the bank save a hefty £1.4 million a day in fees, it takes it a key step closer to severing its reliance on the state.
The eye-watering £2.5 billion premium shelled out on APS since the bank’s 2008 bailout has helped buy it some stability and played a key part in rebuilding market faith in the crest-fallen institution. The management team, led by chief executive Stephen Hester, has been given valuable time to put a credible recovery plan into effect. Over the course of the APS membership, the £282bn of toxic assets have been whittled down to a mere £100bn or so.
Today’s withdrawal from the scheme was confirmed by RBS yesterday and provided some further cheer for its shares. Investors welcomed the lack of any onerous conditions attached to the move.
The shares were given a lift to close at 286.1p but still have a considerable way to go to hit the 500p that allows the taxpayer to break even.
Treasury minister Sajid Javid has made it clear that the government is not planning to sell its stake in the near future, and RBS will need to show it has resolved several technical issues before the 82 per cent holding can realistically be reduced.
There is talk of an initial sell-down prior to the next general election. An early move for political reasons should be resisted though, as it is likely to incur taxpayer losses.
RBS needs to focus on completing its complex capital restructuring, parts of which require approval from European regulators and also involve converting the government’s B shares into ordinary stock.
The bank has successfully floated off its Direct Line insurance business, but its plans to sell 316 high street branches to Spanish peer Santander worryingly unravelled last week.
Comments made yesterday by the Bank of England’s deputy governor, Paul Tucker, that the “worst may still be ahead” for the banking system is likely to force many major lenders to further bolster their capital defences.
Nonetheless, as Hester stresses, the exiting of APS remains a “significant milestone” in the bank’s road to recovery.
Little to lift the retailing gloom
New research suggests that major retail chains closed an average of one shop per day in Scottish cities and town centres during the first eight months of the year.
The figures come just days after the Scottish Retail Consortium reported pedestrian growth in high street sales last month.
Shopkeepers will be praying for a much-needed festive boost.