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RBS posts wider H1 net loss

RBS posts wider H1 net loss
AP
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First Published: Fri, Aug 07 2009. 12 30 PM IST
Updated: Fri, Aug 07 2009. 12 30 PM IST
London: The Royal Bank of Scotland posted a wider first-half net loss Friday, as sluggish retail and corporate business wiped out strong gains in investment banking. The bank was hit by £7.5 billion ($12.6 billion) in bad debts.
RBS, in which the government now holds a 70.3% stake, reported a net loss of £1.04 billion ($1.7 billion) in the first half, compared with a loss of £827 million a year ago.
Revenue rose 58% to £21.84 billion , from £13.84 billion a year ago, as the bank also made progress on a sweeping restructure of the business implemented after it was bailed out by the government in October.
The bank added that its writedowns on bad debts had increased to £7.5 billion . But the results were also boosted by a £3.8 billion profit from buying back the bank’s own debt when the banking crisis made it cheap.
Chief executive Stephen Hester said that first-half results were “poor,” but added that analysed alongside the bank’s new strategy “they highlight well our core business potential, the hard work of our people in difficult times and the vulnerabilites and economic headwinds we grapple with.”
Hester said it was a “momentous half year” for the bank, in which it gave “a full and clear account of our vulnerabilities” to the credit crunch.
“We set out comprehensive restructuring plans, now with clear performance targets and implementation is well underway, though uncertainties remain,” he said.
RBS, Britain’s biggest bank in balance sheet terms, earned the dubious honor of posting the largest annual loss in British corporate history last year — a £24.1 billion ($34.4 billion) black hole fed by the bank’s aggressive acquisition spree of recent years.
The very public downfall of RBS, a household name in Britain where it is heavily involved in the retail banking market, has been a lightning rod for much of the public disgust at mismanagement of major financial institutions by well-paid senior bankers.
After the bailout, a new management team was put in place and unveiled a sweeping restructuring and announced plans to dump hundreds of billions of pounds of toxic assets into a government insurance program.
But the bank continued to court controversy when anger erupted over a £16 million pension pot bestowed on its disgraced former chief executive Fred Goodwin.
Hester said Friday the board was confident of returning the bank to standalone strength, allowing the government support to be recouped in full.
However, he added there “will be no miracle cures,” and overall results may not substantially improve until 2011 and full recovery “will take time.”
RBS shares surged 10% on Thursday, closing at 53.45 pence as analysts and investors anticipated a relatively benign earnings update after the much bleaker report from fellow bailout recipient Lloyds earlier in the week.
The government took a stake worth £20 billion in RBS in October to prevent its collapse. The recent rise in the share price has taken that stake to £21.2 billion as of Thursday’s close.
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First Published: Fri, Aug 07 2009. 12 30 PM IST