RBS announces $1.5M writedown on subprime debt

EDINBURGH – Royal Bank of Scotland Group plc, the second-largest U.K. bank, yesterday said its earnings will exceed analyst estimates this year, despite $3 billion (1.5 billion pounds) in writedowns from the credit-market slump.
The bank – the parent of the Providence-based Citizens Financial Group – considers its holdings in U.S. subprime-mortgage-related debt to be worth as much as 90 cents on the dollar. According to Bloomberg News, RBS said its $23 billion acquisition this year of ABN Amro’s Asian and securities unit accounted for about a fifth of the bank’s overall writedowns, but that unit also will add more to 2007 earnings than the bank originally forecast.
The writedowns were in line with the median forecast from a Bloomberg survey of five analysts – though Colin Morton, a Leeds-based fund manager at Rensburg Fund Management who helps manage 1.5 billion pounds including Royal Bank shares, told the wire service: “People were expecting [writedowns of] 2 billion or even 2.5 billion pounds. It is as upbeat as you could ever expect it to be.”
RBS shares rose in London trading on the earnings forecast and an advisory from HSBC Holdings Plc, which encouraged investors to increase their holdings in RBS shares, raising its rating of the stock to “overweight” from “neutral,” Bloomberg News said.
The Edinburgh-based Royal Bank of Scotland Group plc is the parent of Citizens Financial Group Inc., a $164 billion commercial bank holding company with about 25,000 employees at 1,600 branches in 13 states and non-branch offices in about 40 states. Additional information is available at citizensbank.com.