RBS sounds alarm on bad debt bill

ROYAL Bank of Scotland has angered the City by refusing to reveal how much it expected to lose through its exposure to failed energy giant Enron and troubled cable group NTL.

The market had expected RBS would use its trading statement to end the damaging speculation about how much it expected to write off.

But the bank said only that total bad debts had increased in the second half, due in part to the 'impact of specific customer situations'. It gave no insight into the size of the rise.

The lack of information about the bad debts offset good trading news. RBS said income growth in the current half year was 14% in the first six months. It also reported savings from the NatWest takeover to be better than expected, underpinning a rise in the net interest margin from the first half.

Uncertainty about bad debts has overshadowed the bank's shares recently, because of concerns about possible exposure to Enron and NTL. Analysts had predicted Royal Bank's bad debt charge would be about £800m for 2001. Market estimates of RBS's exposure to Enron range from £60m to £600m. Many analysts put it at around £200m. They expect similar provisions for its exposure to NTL.

Analysts described the overall statement as 'neutral to slightly positive' as the shares rose 71p to 1617p in a flat market. 'The statement is very vague regarding bad debts,' said SG Securities analyst Richard Staite. 'People will be disappointed they have not been clearer. Their disclosure is consistently weaker than the other banks'.

But an RBS spokesman defended the bank's decision to remain silent over Enron and NTL, saying Barclays had also refused to comment on its exposure to the energy group. Enron has said it owes Barclays £88m. 'We are fully aware of our obligations to the market and if we felt we had to report something specific, then we would,' he said.

RBS said it was confident its full-year earnings would meet market forecasts of about £5.6bn before goodwill charges and NatWest integration costs. Chief executive Fred Goodwin said that while there was 'inevitably a greater degree of uncertainty' about the economic outlook, the bank was in good health. He said the size of the increase in bad debt charges would not be a cause for alarm, but declined to be more specific.