RBS making a £160m provision for bad Brexit

Lucy Burton Latoya Harding

ROYAL Bank of Scotland has set aside £160m to cushion a potential hit from Brexit amid fears of an economic downturn.

Chief executive Ross Mcewan said that there was “a lot more uncertainty in the marketplace at the moment and that’s what this is reflecting”. State-backed RBS is the first major bank to take such a charge.

The provision is linked to the potential risk of an increase in bad loans in the event of zero or negative economic growth. Mr Mcewan had warned that a “bad Brexit” could stunt growth, knock the bank’s share price and tip the UK into recession. He said the bank was being careful about which areas of the economy it lends to.

However, yesterday he said he had noticed a more “optimistic tone” coming from Theresa May, the Prime Minister, after speaking to her about the Brexit negotiations last week. RBS shares fell 4.1pc to close at 224.9p yesterday.

Laith Khalaf, of Hargreaves Lansdown, said RBS’S Brexit buffer “serves as a reminder that the bank’s fortunes are very heavily influenced by the domestic economy, and by extension, so is its share price”.

Jefferies analysts said the decision was “not explained well” and “at odds with the actions of other banks operating in the same market”.

Around £60m of the provision will cover bad loans in RBS’S Irish business.