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RBS unveils charm offensive The Times July 09

ROYAL BANK OF SCOTLAND is launching a nationwide charm offensive to persuade Britain’s small businesses that it is trying its best to keep credit flowing to the real economy.

The bank will this week roll out a huge advertising campaign, featuring case studies of business customers from across the country who have secured new financing from the taxpayer-backed bank.

A letter from Stephen Hester, the chief executive, to be sent to the bank’s corporate customers, will claim that the bank is accepting 85% of credit applications from business customers and stress that the bank is “open for business”. Nonetheless, it will also claim that demand for credit from small businesses has dried up in recent months and that it may struggle to meet the lending targets imposed as part of its multi-billion pound bail-out package.

RBS’s campaign comes as Britain’s bank bosses prepare for another showdown with chancellor Alistair Darling tomorrow over lending levels.

A survey by RBS revealed that most small businesses plan to tighten their belts over the next six months, rather than take on more debt. One in three plan to save money to cope with the recession, while just 18% intend to increase their borrowings.

The findings are expected to be supported by anecdotal evidence from other bank bosses in Monday’s meeting, who all claim to be making more finance available.

The big banks are also expected to claim they are each lending more money to the mortgage market than in previous years despite the broader tightening of credit across the market.

Alan Dickinson, head of UK corporate banking at RBS, said: “Many consumers and companies are reducing their debts where they are able to do so. RBS and NatWest are, however, actively stepping in to provide substantial mortgage and business finance where overseas and other banks are reducing their commitments in the UK.”

Meanwhile, a number of foreign banks are moving in to capitalise on the UK mortgage market. Bank of China, the state-owned Chinese bank, has started to offer UK mortgages at interest rates as low as 3.5%. Standard Chartered is also rumoured to be considering an expansion of its UK business.

RBS signed an agreement with the government this year, pledging to make an extra £16 billion of lending available to the UK economy.

It is understood that the bank is easily on track to meet its commitments on mortgage lending but a long way behind target on small business lending.