RBS To Cast Off £3bn Shipping Loan Book

The taxpayer-backed Royal Bank of Scotland (LSE: RBS.L - news) (RBS) has drafted in advisers to pilot a sale of a £3bn shipping finance operation that will further distance the lender from its globe-trotting past.

Sky News understands that RBS is working with bankers at Lazard to examine options for the shipping loans, which could be run off, sold or hived off in chunks to potential buyers.

The bulk of the business under review relates to RBS’s shipping finance business in Greece, and an exit will mark another chapter in the bank's international retrenchment since its £45.5bn bail-out by taxpayers in 2008.

RBS has already exited dozens of countries and is continuing to take steps to shrink its vast balance sheet, which now stands at roughly £700bn.

Under Ross McEwan, its chief executive, the bank continues to wrestle with the sprawling legacy of its expansion under Fred Goodwin, who was ousted with RBS on the brink of collapse.

Last month, it announced that a series of charges for mis-selling, pensions and future litigation would tip it into the red for the ninth successive year.

RBS's shipping business accounted for just over £8.2bn of its total assets at the end of the third quarter last year, representing not much more than 1% of its overall balance sheet.

Bank insiders said that the portfolio being worked on by Lazard was less than half of that total shipping exposure.

Last autumn, RBS warned of tough conditions in the shipping market, echoed on Wednesday by AP Moller-Maersk, the industry giant, which said the environment was worse than during the 2008 financial crisis because of the slowdown in global trade.

"Conditions remained depressed in the bulk market during [the first half of] 2015 as a result of vessel oversupply and a slowdown in commodity demand from China," RBS said in October.

"Tanker market conditions are currently favourable and container markets over the last 12 months have stabilised but remain weak in comparison to historic averages…[and] downside risks exist over the next 12-18 months."

An RBS spokesman said: "RBS Shipping is a strong franchise with one of the most significant portfolios in European finance.

"In light of our wider strategy to create a simpler, stronger, and more sustainable bank, better aligned to the needs of our customers in the UK and Western Europe, we are actively exploring alternative strategic options for our Shipping business (Other OTC: UBGXF - news) ."