RBS positive on rewards of ABN acquisition

by Gill Montia

Story link: RBS positive on rewards of ABN acquisition

Royal Bank of Scotland (RBS) has confirmed that it will not be facing unexpected exposure to sub-prime related losses as a result of its joint acquisition of Dutch bank, ABN Amro, last year.

RBS chief executive, Sir Fred Goodwin, said: “We are happy we bought what we thought we bought”.

He has also indicated that, following the merger, significant cost savings are being achieved, such as a 20% reduction in ABN’s stationery bill and savings in shared computer software.

Originally RBS predicted annual cost savings of €1.32 billion and revenue benefits of €395 million, by the third year following the acquisition. The estimates have now been revised to €1.59 billion and €688 million respectively.

RBS and its partners, Banco Santander and Fortis, paid €71 billion for ABN and are awaiting approval from the Dutch authorities before they restructure the bank’s assets.

So far, RBS has passed through the credit crunch relatively unscathed, with writedowns on sub-prime and other asset backed securities amounting to £659 million.

A further £285 million has been written down on leveraged buyout loans and £456 million in connection with predicted defaults by the insurers of sub-prime assets.

The bank has no plans for further acquisitions in the near-term and Sir Fred is in agreement with Hector Sants, the chief executive of the Financial Services Authority, in that he believes that the availability of credit has changed permanently, saying: “It’s not going to go back to the way it was, and that’s a good thing.”