Royal Bank of Scotland reduced its bad bank’s commercial real estate portfolio in 2014 to £12.6bn as it divested, repaid and wrote off more than a third of the gross lending, according to its annual statement.
In particular, the bank made significant strides in reducing its non-performing loans book as it seeks to close out the bad bank, RBS Capital Resolution, by the end of the year.
RCR’s £6.1bn CRE portfolio represents 29% of RBS’ total CRE exposure, which in total fell by £9.3bn in 2014.
The bad bank managed to divest itself of £4.8bn of NPLs in 2014, reducing its total holding to £11.2bn. Those that remain still represent a loan-to-value ratio of more than 338%, which is up the 292% reported for same period last year.
Performing loans were reduced by £1.9bn to £1.4bn. More than £1.1bn of those loans are now on an LTV of less than 100%
67% of RCR’s portfolio remains Irish assets, with 22% in the UK, 10% in Western Europe and 1% in the rest of the world.
The rest of RBS’ CRE loan book reduced its overall loan exposure by just under £2.75bn. Non-performing loans were reduced by £3.1bn to just over £2.6bn.
Performing loan exposure increased by £633m over the same period but saw a reduction on possible risk by reducing the LTV to 56% from 64% in 2014.
Despite this RBS still has £934m of its performing loans with an LTV of more than 100%.
Loans for retail development and investment saw the greatest reduction in exposure of any market segment across the group’s CRE loans. The portfolio reduced from £6.9bn in 2013 to just over £4.9bn in 2014.
NPL exposure at Ulster Bank, accounted for separately to RCR, was reduced by £5.4bn to £8.8bn by the end of 2014. Of these, £5.8bn were in unsecured development loans.
The performance of property markets also helped RBS to improve impairment provision across the group, releasing a net £1.15bn into the balance sheet as a RCR and Ulster Bank reaped the rewards of an increase in values. RCR recorded £1.3bn in releases and Ulster Bank £365m.
RBS’ commercial banking division reduced its overall commercial real estate lending by 9% to 18.3bn in 2014.
RBS made a £3.5bn loss in 2014 as one-off costs associated with the flotation of Citizens Bank in the US harmed performance.
