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Thursday, February 24, 2011

Property loans reduce but impairments rise at RBS

Property loans reduce but impairments rise at RBS ; Royal Bank of Scotland trimmed its commercial property loan book by more than £10bn last year as it sought to reduce its exposure to the sector, but the bank suffered a rise in impairments on property loans.

The bank, which is the UK’s largest lender to commercial property, said its property loans and assets dropped by £11bn to £87bn in 2010, as a result of loan repayments, restructurings and sales.

Of this lending, £43bn is considered “non-core” by RBS, and needs to be repaid or sold by 2014, with this book having been reduced by £9bn in 2010. The bank gave a breakdown on how this reduction was achieved; while £3.2bn was extended, £6.2bn was repaid, £1.4bn was sold or restructured and £4.2bn was written off through impairments.

The number of loans being sold this year by the bank is expected to increase, and it warned that new lending to the sector would be limited.

“Commercial real estate will remain challenging for key markets, such as UK, Ireland and the US; new business will be accommodated within a reduced limit framework,” RBS said.

The bank also broke down how it property loan book is managed. Just over £45bn is managed normally, with annual revaluations; £9.2bn is on a credit watchlist of potential future problems, down from £17.9bn in 2009; but £32.2bn is being managed by the global restructuring group, up from £22.2bn the year before.

Impairments on property lending rose slightly to £3.3bn compared to £3.2bn in 2009, primarily as a result of a sharp spike in losses on Irish loans, from £303m to £699m. For the latest updates PRESS CTR + D or visit Stock Market news Today

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