RBS heavily exposed in Cattles breach

by Gill Montia

Story link: RBS heavily exposed in Cattles breach

Royal Bank of Scotland (RBS) could tot up losses of between £400 million and £500 million in connection with the demise of Cattles, the doorstep lender that is in breach of its banking covenants.

Cattles, which trades as Welcome Financial and Shopacheck, has issued a number of profit warnings this month and at the same time announced the suspension of six directors.

It has also delayed publication of its 2008 accounts having reassured investors that profit would be in line with market expectations of £174 million, in January.

In addtion Cattles says it will be restating its 2007 figures, after reporting a 25% rise in earnings for the year.

Deloitte and legal firm Freshfields Bruckhaus Deringer are undertaking a review of the business, having been called in by auditors; nvestigations so far have indicated that there has been a “breakdown in internal controls” in Cattles’ Welcome Financial division.

Lloyds Banking Group, Barclays and HSBC are also involved in financing the firm and are no doubt weighing up their options, which include a debt for equity swap.

However, the sub-prime lender’s shares closed at a mere 2.1p at the end of last week.

Cattles employs around 4,000 staff and jobs losses would appear to be inevitable.