Royal Bank of Scotland sees easing in bad-debt provisions, an exec says.

EDINBURGH - Bad debt provisions are trailing downward in an environment of slow economic improvement, said Robert Speirs, finance director of Royal Bank of Scotland Group PLC.

"We expect to see bad debt provisions falling off, but we don't want to be complacent because another downturn in the economy would give us a problem," he said in an interview.

Mr. Speirs said he believed the recession had bottomed out, but did not see a real acceleration in recovery.

"We are coming out slowly, and there are stutters," he said.

May Stimulate Recovery

There was still concern over any real "push" behind the economy, which might need a further interest rate reduction to stimulate recovery.

"We think an interest rate cut may be needed," he said. "Our balance sheet is positioned so that a cut of one percentage point would not have a significant long-term impact."

Mr. Speirs said Royal Bank's five-year Columbus Project was moving along on target, with 3,500 job reductions envisaged by the end of 1997.

"It will give us some early wins and some cost reduction overall," he said.

In areas like its Direct Line car and house insurance group and its Citizens Financial subsidiary in the United States, more staff would be added.

He said Royal Bank had less fat to trim than its competitors and had more to do on the income side of its cost-income ratio.

"The big caveat is that we are not just going for growth for its own sake," he said. "We are looking for quality growth and have systems in place to review the loan book in great detail."

Mr. Speirs said once the objectives were achieved, Royal Bank could derive an incremental benefit from its smaller size, which enabled it to maintain shorter lines of communications and extend its growth programs to the entire retail bank.

He said the bank would be returning to the capital markets occasionally, but did not require any capital now.

"We raise it when the opportunity exists basically because it exists and we like to stay in those markets," he said.

Assets Expected to Grow

Recent capital raisings had been earmarked for Direct Line and Citizens Financial, he said. He expected Citizens Financial to expand significantly in the next three years.

"Citizens' assets have increased to $7 billion now from $3 billion when we bought it in 1988, and we expect them to grow to $10 billion in the next three years," he noted.

Growth is expected to come primarily through acquisitions in Connecticut, Rhode Island, and Massachusetts, he said. This is Citizens' base of operations.

"We bought a cautious, unexciting bank," Mr. Speirs said. "We could sell Citizens now for well above what we paid for it, but we don't want to do that."

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