RBS' silence ajudged 'ominous'

30 November 2007

Analysts have said that the Royal Bank of Scotland (RBS) Group's silence is "ominous" and may indicate that the bank will have to announce massive writedowns in the near future.

Anthony Broadbent of Sanford C Bernstein & Co estimated that Britain's second largest bank may have to write down $4 billion, with the vast majority of the losses related to the US sub-prime mortgage market.

Mr Broadbent wrote in a note that RBS "has been very, some say ominously, quiet since its first-half results'', which it published in August. The bank has also failed to be very vocal since it bought ABN Amro Holding NV's investment-banking branch, Hoare Govett, in October, he noted.

Although Mr Broadbent had previously predicted a lower writedown rate, he now expects more losses given the bank's silence, although the bank has "committed to provide far fuller disclosure than usual'' in its trading update on December 6th.

Meanwhile Sandy Chen, analyst at Panmure Gordon & Co, told Bloomberg: "We see Royal Bank, particularly after the acquisition of ABN Amro, being particularly exposed'' to derivatives and has advised stockholders to sell up. "We are really in the first stages of the unwind of all the structured credit that has been built up over the last seven years'' in banks.

RBS shares have taken a dive of 33 per cent this year amid funding fears.

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