RBS sees slowdown in UK, preparing for various EU referendum scenarios

Royal Bank of Scotland said on Wednesday that it has seen signs of a slowdown in investment and in retail sales in the UK, with overall growth likely to be a little slower than was expected last year.

In a speech to be given at the bank’s annual general meeting, chairman Howard Davies pointed out that after RBS has completed the sales of its non-core businesses and carried out the planned restructuring, around 90% of its income will be generated from clients in the UK, where the upcoming EU referendum was creating additional uncertainty.

“We are not one of those financial institutions whose core business depends critically on unfettered access to the EU markets, though our Irish and Western European businesses are significant.

“But if a vote to leave the EU leads to a slowdown in growth, as the Treasury, Bank of England and most other economic forecasters suggest, that would be an unwelcome headwind for your company,” said Davies, adding that RBS was preparing for “various potential scenarios”.

Davies went on to say that current financial conditions are difficult for all banks, noting that when official interest rates are so low, net interest margin tends to contract.

“And investors have been influenced by the view that in a generally softer environment for global GDP, rates seem likely to remain lower for longer.”

At 1445 BST, RBS shares were down 1% to 220.20p.