RBS warns of 'consumer caution' blow

ROYAL Bank of Scotland sent a shudder through the banking world today as chairman Sir George Mathewson told shareholders at the annual meeting that it was 'facing a period of increased consumer caution in the UK'.

Mathewson added, however: 'In corporate banking and financial markets, we continue to see good growth in the UK and in our overseas operations.'

But analysts took his remarks as downbeat, one pointing out that the first three months of this year were one of the worst quarters experienced by UK bank shares in the past decade.

Goldman Sachs said UK banks' share prices underperformed the stock market by 4.6% in the first quarter, their worst stock market result other than during the specific problems of the dotcom crisis in 2000, the Russian debt default in 1998 and the Asian crisis of 1997.

The broker said RBS and Barclays remain the two banks least vulnerable to a dramatic decline in consumer credit quality.

Mathewson said the integration of US takeover Charter One 'remained fully on track'. Investors expected the bank comfortably to defeat opponents of its new executive pay scheme.

They had been heavily critical of the pay package for Larry Fish, head of its US offshoot Citizens Finance, who was paid £2.3m including a £1.6m bonus last year. RBS shares today slipped 19p to 1600p.