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RBS to accelerate UK mortgage growth


According to Market Intelligence, February 2023


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RBS to accelerate UK mortgage growth

Royal Bank of Scotland Group Plc aims to outpace the competitive U.K. market in terms of mortgage growth, according to CEO Ross McEwan.

"Our objective is to grow faster than the growth in the market," he told analysts during an Aug. 4 call for the bank's second-quarter earnings results. "We haven't set ourselves a 12%, 13% or 14% target. Our aim is just to grow faster."

In terms of mortgage pricing, though, RBS is around the same level as the rest of the market, despite some failed attempts to "eke out" more margin, McEwan said.

The U.K. mortgage market has become increasingly competitive, but RBS expects volume growth to offset the adverse effects of lower margins. The margin in the mortgage front book is around 40 basis points lower than the back book, and McEwan said he expects further compression in the rest of the year.

Given the uncertain economic outlook in the U.K., RBS has made a conscious decision to grow secured mortgage lending, and will compromise on margins to achieve volume growth if necessary, the CEO said.

RBS' mortgage book totaled £123 billion at the end of the first half, compared with £117 billion at the end of 2016.

By contrast, the bank has a conservative approach to its growth plans for unsecured lending.

"We've got lots of scars in this organization around unsecured lending, so you've got to put our position in context," McEwan said. "We do want to do unsecured lending and have done quite a lot in the personal lending piece. But we've been a little concerned about the credit card piece, but we are working through some options. We are cautionary, and we are just dealing with our existing customers."

The bank's unsecured lending book fell 1% year over year in the first half, compared with 10% overall market growth, according to a results presentation.

McEwan's comments come as RBS reported a return to profitability in the second quarter, thanks to lower litigation and conduct charges. Net profit came in at £680 million compared with a £1.08 billion loss a year earlier. Conduct and litigation charges totaled £342 million, compared with £1.28 billion in the second quarter of 2016.

RBS' underlying pretax profit came in at 37% ahead of a forecast by the team of analysts at Investec, and 59% ahead of consensus.

Investec welcomed the lower number of "surprises" in terms of fines and legal costs during the quarter, but warned the bank could yet record another full-year loss at the end of 2017.

"For all the welcome progress, we believe that RBS very much remains a multiyear recovery story," the analysts wrote in an Aug. 4 note.