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Sancho Panza

Rbs Makes £50M Profit From Distressed Businesses

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Telegraph 26/11/13

'Royal Bank of Scotland's controversial turnaround division has generated nearly £300m in revenues from the lender's distressed property developer clients since its taxpayer-funded bailout five years ago. West Register, the specialist distressed property book run by RBS's global restructuring group (GRG), has made revenues of £276m and profits of just over £50m since 2008.

An analysis by The Daily Telegraph of the 13 subsidiaries that make up West Register show that the unit controlled assets worth a total of £1.17bn at the end of last year, the latest period for which figures are available.

The details of the highly-profitable business emerged as RBS's lending practices, and in particular the activities of GRG, were criticised in two reports published yesterday.

Lawrence Tomlinson, a multi-millionaire adviser to the Department of Business, Innovation and Skills, accused RBS of "killing off" smaller businesses for its own profit, reporting instances of property revaluations taking place without site visits and property taken over by RBS subsequently being sold for a higher price than the bank's own valuation.

Mr Tomlinson's report has been passed to the City regulators by Vince Cable, the Business Secretary, and RBS said it had hired law firm Clifford Chance to investigate his claims.

RBS was already facing pressure over its turnaround business's operations following a report by former Bank of England official Sir Andrew Large, who recommended last month that the lender look into claims by some smaller businesses that GRG had acted against their best interests to make more profit.

An analysis of West Register accounts highlights the expansion in the size and profitability of RBS's restructuring division since the financial crisis. One subsidiary, West Register Investments, has grown in size from £21.8m in 2008 to £110m at the end of last year, while its profits have increased from £10m to £52m over the same period.

The property restructuring group's largest individual unit by assets is West Register Property Investments, which has seen its assets expand from just under £19m in 2008 to £579m in 2012.

Separate accounts are not available for GRG, which is run as a profit centre by RBS.

Chuka Umunna, shadow business secretary, said he was concerned that a bank 81pc owned by the state was operating a division meant to help stricken customers as a source of profit.

Businesses that have dealt with GRG staff have complained they have been required to pay hundreds of thousands of pounds to RBS in penalty fees, as well as being forced to pay out large sums of money for reports by outside consultants.

RBS chief executive Ross McEwan admitted in a letter to Sir Andrew that his report had "been a tough read," but the bank had put in place procedures to improve lending to small firms and halt "reckless lending practices that broke this bank five years ago".

Edited by Sancho Panza

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