RBS pins hopes of turnaround to profits on rising interest rates

 
Tim Wallace
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RISING interest rates would quickly make RBS billions of pounds, the bank’s finance chief revealed yesterday, raising hopes that the economic recovery will boost the taxpayer-backed lender.

If rates are hiked one percentage point, incomes would rise £450m in the first year, £640m in the second and £860m in the third.

And a gradual rise of two percentage points would push up profits by £260m initially, £700m in the second year and £1.16bn in the third year – boosting core return on equity by as much as two percentage points.

“We are well positioned for a rising rate environment,” finance boss Bruce Van Saun said at a Bank of America Merrill Lynch conference yesterday, noting it would improve margins on loans.

He argued RBS is “willing and capable of lending” more, pointing to its 12 per cent market share of new mortgage lending versus eight per cent stock of mortgage loans.