LONDON – Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender and the parent company of Citizens Financial Group Inc., dropped in London trading because of investor concern about 42.2 billion pounds ($68 billion) of loans to Ireland, according to MFGlobal Securities Ltd. analyst Shailesh Raikundlia.
The stock lost as much as 5.6 percent and traded 4 percent down at 40.46 pence as of 10:50 a.m. on Thursday, the lowest in four months. The bank was the second-worst performer in the Bloomberg 500 Banks Index after Bank of Ireland Plc.
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“It’s to do with their exposure to Ireland,” said Raikundlia. “They have significant exposure.”
Irish bond yields have soared on concern that the government will need assistance bailing out its banks, which are struggling with bad loans after the end of a decade-long real estate boom. Irish Central Bank Governor Patrick Honohan yesterday said that loan losses at the country’s lenders, including foreign-owned banks, come to at least 85 billion euros ($117 billion).
RBS’s Ulster Bank unit had 37.8 billion pounds of loans in Ireland, including 21.4 billion pounds of mortgages at the end of the third quarter, the bank said last week. It also had 4.3 billion pounds invested in Irish sovereign debt, according to stress tests in July. A spokesman for RBS declined to comment on the price movement.
RBS last week said loan losses in Ireland “increased sharply, reflecting a deterioration in the economic environment.” Ulster Bank posted loan losses of 286 million pounds in the three months ending Sept. 30, double those in the year-earlier period. It also doubled its pretax operating loss to 176 million pounds.
RBS, based in Edinburgh, was bailed out in 2008 and 2009 with 45.5 billion pounds of government assistance to bolster its capital. Taxpayers own 83 percent of the lender.
