Treasury reveals RBS shifted £69bn of bad loans to APS

A large slice of RBS’s transferred loans are due for repayment in 2009

Three quarters of Royal Bank of Scotland’s £91bn commercial property loan book has problems, according to data published this month detailing loans RBS has put into the Asset Protection Scheme. The Treasury says all of RBS’s 56,650 of transferred real estate loans, worth £69bn, are either in default, being restructured, being provided against or are on the bank’s internal watch list.

The breakdown reveals the size of RBS’s impaired property book to be even higher. The bank cut the total of covered loans from an original £325bn estimate to £282bn, partly because “assets potentially eligible for transfer to the Republic of Ireland’s National Asset Management Agency were excluded when the covered amount was decreased”, says the UK Treasury document.

The APS also includes 70,000 residential mortgages, totalling £10.4bn. RBS will take the first £60bn of losses on the loans covered by APS, or 19%, with the government taking most of the rest, but it hopes £60bn will be the maximum net loss. The data also reveals that more than half of all the biggest loans (£14bn worth) by the real estate origination team in RBS’s Global Banking & Markets division are due to mature by 2012.

A third, or £10.7bn, of the UK property book was due to be repaid this year. The £69bn of RBS’s problem loans is twice as high as the total number of UK property loans banks said were in breach or default in De Montfort’s mid-year lending report, published this month.