RBS ratings unaffected due to commodities JV

Standard & Poor’s Ratings Services said today that its ratings on The Royal Bank of Scotland Group (RBSG; AA-/Stable/A-1+) and related entities are unaffected by today’s announcement that it will be taking a controlling interest in a commodities trading and marketing joint venture alongside Sempra Energy (BBB+/Stable/A-2). Through the joint venture, to be called RBS Sempra Commodities LLP, RBSG will acquire a majority shareholding in Sempra Commodities, the commodities trading and marketing business of Sempra Energy, for a consideration of $1.35 billion. The impact on RBSG’s capitalization and market risk is not considered material. This move, which propels RBSG’s commodities trading activities into the top five globally by revenues, does highlight the growing role for RBSG’s Global Banking Markets (GBM) business. GBM contributed 40% of group earnings in 2006, but its income sources are increasingly well diversified. Standard & Poor’s considers that Sempra Commodities trading risk management is strong. Sempra Commodities has executed a consistent strategy and has a good track record, with positive net income each year beginning 1999 and in the majority of trading days.