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RBS Estimated Loss on Toxic Loans Cut to 45 Billion Pounds

Losses stemming from Royal Bank of Scotland Group Plc’s toxic assets have fallen to an estimated 45 billion pounds ($72.5 billion), the Asset Protection Agency said in its annual report today.

The forecast loss in last year’s agency report was 57 billion pounds, close to the 60 billion-pound “first loss amount” above which taxpayer-insurance is triggered.

“Improved market conditions and the passage of time have significantly diminished the risk to H.M. Treasury as an insurer,” said Stephan Wilcke, the agency’s chief executive officer, in the report. “Instead of a payout being fifty-fifty likely under the scheme, we are now well on course for H.M. Treasury to make an overall 5 billion-pound profit without having to pay out.”

Potentially toxic RBS assets insured by the British taxpayer shrank to 182 billion pounds from 234 billion pounds, the agency said. The agency said that RBS had paid it 2.1 billion pounds, while Lloyds Banking Group Plc, which no longer uses the program, paid it 2.5 billion pounds.

Commercial real estate loans are the “biggest remaining vulnerability,” while only a “relatively small portion” of assets were in troubled euro-zone countries, the report stated.

The APA was created in 2009 as the government was forced to bail out RBS with a 25.5 billion-pound capital injection. RBS has cut more than 27,000 jobs and reduced its balance sheet by almost a trillion pounds since CEO Stephen Hester replaced Fred Goodwin during the 2008 banking crisis.

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