RBS chief Stephen Hester warns bank may miss returns targets

Royal Bank of Scotland has been forced to admit it might not be able to meet its targeted return due to tougher-than-expected market conditions. 

In a presentation to a conference in London on Tuesday, Stephen Hester, chief executive of the state-backed lender, said the bank's returns targets were "under review in light of challenges".

RBS is currently hoping to generate a return on equity from its core business, which constitutes the lender's ongoing operations, of in excess of 15pc by 2013. In common with other major banks, Mr Hester said it would be harder for RBS to meet its target as he ran through a range of economic and market challenges.

Among the problems identified in the presentation were interest rates being held "lower for longer", "risk aversion" among RBS's investment banking clients, and worries over the cost and availability of funding from the wholesale markets.

Return targets set by many banks at the beginning of the year have come under increasing scrutiny by investors.

Barclays, which also has a 13pc return on equity target for 2013, has robustly defended suggestions that it might not meet the goal. Bob Diamond, chief executive of the bank, said on Tuesday he was still "confident" Barclays would hit the target.