Get ready for recovery, RBS tells business
TWO senior figures at the Royal Bank of Scotland have said they want to lend to more of the region’s businesses, so they will be ready for the upturn.
Peter Ibbetson, chairman for business banking at RBS and Bill Ratcliffe, managing director, business and commercial banking for North West and Wales, said they want to increase their lending book but businesses’ prudent approach is making it hard for them to do so.
Mr Ibberton said: “We are empathically open for business. We made a legal commitment to government to provide access to substantial funding – £25bn in all with £16bn of that is for the commercial and business market.”
He said the bank’s lending book has stayed flat overall as businesses are paying back loans and with low interest rates, they are doing so faster.
“In a downturn, people deleverage. So they pay back money. Prior to the recession we saw lots of equity release. But now people are paying down, which is characteristic of the business market in a downturn,” he said.
“The net book will decline, but we aspire to get that up. We are gross lending more new money than in the past. It will continue to prove challenging until the demand side is there, and that’s down to the confidence of business.”
But RBS has lent more than £55m the North West through the Government backed Enterprise Finance Guarantee scheme. Of the 27 banks that signed up to the government’s EFG scheme, RBS handles 43% of EFG volumes across the country, rising to 50% in the North West, the pair said.
RBS serves 65,000 SMEs in North West and Wales, of which 40,000 are small businesses. In the North West RBS has a 42% market share of the SME sector.
Both said RBS wants a more open dialogue with customers, insisting that the earlier it knows about any problems, the easy it is to help.
Mr Ibbetson said: “The old model was that the business manger on the frontline would see things were sticky and so pass the business on to the recovery guy.
“But in the downturn lots of businesses are in the middle ground. For many businesses the debtor period has gone up, which deteriorates cash flow. Our job is to support businesses as they have cash flow problems. There are a raft of viable businesses that are short of cash flow.”
The bank has brought in 50 local managers across the North West who have experience of banking in the last recession and sat them locally with relationship managers.
“They are there to help businesses back to health. That’s our focus, not getting the money back,” said Mr Ratcliffe.
“If we think a company has legs but it can’t repay its borrowing, we’ll look at equity swaps, or we can cancel the interest. There is no sense in dragging a company down, and we have no interest in doing that commercially.”
Both admit that their message is a tough one to get across and recognise there is a lag in perceptions.
“Trust and confidence are important,” said Mr Ibbetson. “A year ago was rock bottom for customers and staff. We are working hard to build that back up.”
To help build that trust RBS is offering a price promise to its business customers and will commit to a business’s overdraft facility, without changing or reducing it on a month by month basis.
“We recognised that some businesses were nervous about fees going up and their facility being overdrawn. We’ve committed to stick with an overdraft once it’s been agreed, and we won’t increase the pricing,” said Mr Ratcliffe.
“Even if the capital costs increase, we won’t pass that on.”
A year on from making that promise, 19 out of 20 businesses are getting the same price as a year ago, according to RBS.
“As we exit the recession, companies will be running on empty, but they will need cash flow support later on. That’s why it might be bumpy. But we are ready and have the liquidity.
“There are fantastic opportunities. Money is cheaper than it ever has been in the past. Now is a good time to be investing the key is to build confidence to be able to do that,”concluded Mr Ratcliffe.
