RBS reports £857-million 1Q loss, after adjusting £4.9-billion bad debts

08 May 2009

Royal Bank of Scotland (RBS) today reported a first quarter loss of £857 million after its bad loans and credit write downs hit £4.9 billion, wiping out its profits.
 
RBS, one of the biggest British banking victim of the global financial crisis, is now majority owned by the UK government. It posted its first annual loss in 40 years in 2008 as bad loans increased, having lost £24.1 billion. (See: British government becomes majority shareholder in RBS as investors reject stock offering)

RBS also said that it has yet to finalise its entry into the government's toxic insurance scheme, which it had agreed to join in February. The bank is still in the process of negotiating with the UK treasury over assets that will be insured by the government.

Stephen Hester, the bank's chief executive, said the company now faced two very tough years ahead.

RBS's  revenues rose 26 per cent to £9.7 billion in the first quarter and the group's profit would have been £4 billion mainly from its investment banking division but the bank's profits were wiped out because of the £4.9-billion bad loans and credit write downs. It had recorded a profit of £245 million in the first quarter of 2008.

The £4.9 billion one-off costs comprised £2.9 billion for bad debts and £2 billion for credit write down of bonds the value of which plummeted and other toxic debt.

The bank's operating expenses rose 20 per cent to £4.66 billion in the quarter.