RBS CEO Hester: We are desperate to lend £20bn – but no-one wants our money

Stephen Hester has waded into the controversy about an apparent lack of lending for smaller businesses, saying Royal Bank of Scotland (RBS) £20bn of cash it was “desperate” to lend out, but companies were not prepared to borrow as they lacked faith in the economic recovery.

“We are lending as much as we can,” Hester said. “We are not constrained by either capital or funding, Mr Hester told The Sunday Times. “The only way I could see for us to lend more would be for someone to say we did not have to operate by any commercial standard – that we could undercut everyone because we did not have to make a profit.” Hester added he could not “force companies to borrow”.

Mr Hester, in an apparent criticism of the Governor of the Bank of England, Sir Mervyn King, who has emphasised the need for banks including RBS to hold increased amounts of capital, said that RBS has “deposits coming out our ears”.

Banks have been accused to stifling the recovery in the UK by failing to lend to businesses. However, Mr Hester’s statement imply it is lack of progress in improving business confidence that is stopping companies from investing for growth, rather than banks constraining lending criteria.

Last week, RBS reported its best quarterly result in more than a year with a pre-tax profit of £826m and said it expects the government to be able to start selling its stake it the lender by the middle of next year or even earlier.

The profit for the first three months of the year compared with a £1.5bn loss in the same period in 2012 and a £2.2bn loss in the final quarter of last year, largely as a result of a fall in impairments in losses from RBS’s “bad bank”.

Its results prompted Chairman, Sir Philip Hampton to say that he expects the government to be able to sell some of the shares owned by the taxpayer by the middle of 2014.

However, according to Hester the first tranche of the sale could come at a loss but that overall the taxpayer should get their money back.