Customers of the Royal Bank of Scotland, owner of NatWest, are becoming wary of taking out relatively expensive unsecured loans to such an extent that its overall interest margins have narrowed in the first half of this year.
In a trading update yesterday, RBS reported relatively strong growth in mortgages and lending to companies. But these both command much lower interest rates than unsecured personal loans.
The shares edged 17p ahead to 1654p. NatWest started the year with a much-publicised "sale" of cut-price personal loans. But this appears to have had a limited impact at a time when many households were trying to pay down their debts amid growing reluctance to buy "big ticket" items.
Like Barclays, the Royal Bank said it was encountering rising credit card arrears. But it expects its provisions for all kinds of bad and doubtful debts to have risen by less than its lending.
Even credit card arrears "whilst higher than the historically low levels seen in recent years, remain within normal parameters", the bank added. It said highlights for its half- time results should include continued strong organic growth in income, "stable credit metrics" and the delivery of expected benefits from recent acquisitions - Churchill insurance and First Active and Charter One in America.
"The group continues to make good progress and, while the adoption of the international accounting standard will make the interpretation of the trends in results generally more challenging this year, the underlying strength of our business performance should be readily apparent when we publish our interim results," said Sir Fred Goodwin, chief executive.
He added that he believes the Bank of England has succeeded in its objective of tempering the growth in consumer credit and that it is likely to leave interest rates unchanged today.
A restatement of the Royal Bank's 2004 results to comply with the new internal accounting standard has the effect of lowering pretax profits by about five per cent, but raising basic earnings per share by some ten per cent.
Adjusted earnings per share - allowing for the purchase of intangible assets and the cost of integrating acquisitions - come out five per cent lower.