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RBS losses less than estimated

Royal Bank of Scotland Group Plc, Britain’s second-biggest bank, posted a smaller loss than analysts estimated and said the £5.9 billion (US$11.4 billion) in writedowns it announced in April may be sufficient for the year.

The loss, the first since RBS went public 40 years ago, was £761 million excluding units that RBS holds on a temporary basis, the Edinburgh-based bank said yesterday in a statement. That compared with net income of £3.6 billion a year earlier. RBS rose as much as 2.8 percent in London trading after it said asset sales and cost cuts are restoring depleted capital.

Chief executive officer Fred Goodwin called the loss “unsatisfactory” and said he’s working to ensure that profit wont’ be “obscured in this way again.”

RBS’ first-half writedowns follow losses of £2.6 billion last year on US subprime mortgages, leveraged loans and bond insurance. Goodwin increased credit risks when he bought the investment bank and Asian unit of ABN Amro Holding last year for US$22 billion.

RBS raised £12.3 billion in June to shore up capital, depleted by writedowns and the purchase of Amsterdam-based ABN Amro. RBS said core Tier 1 capital, which measures a bank’s ability to absorb losses, was 5.7 percent, it said.

The increase in capital reserves is “materially ahead of what we were expecting in April,” Goodwin told reporters yesterday. “It has taken a lot of the pressure off.”

RBS and partners Banco Santander SA of Spain and Fortis of Belgium outbid Barclays Plc last year for ABN Amro, paying a total of US$110 billion in the biggest banking acquisition in history. RBS’ first-half loss including units it holds for partners was £802 million, or £0.066 a share. The loss was smaller than the £1.16 billion average estimate of 10 analysts surveyed by Bloomberg.

Barclays, Britain’s third-biggest bank, had first-half writedowns of £2.8 billion, it reported on Thursday. Its net income declined a less-than-estimated 34 percent to £1.72 billion in the first half of the year.

RBS has tried to sell its British insurance unit for as much as £7 billion, according to people familiar with the matter. Barclays raised £330 million by selling its UK life insurance arm, the bank said this week. RBS is also in talks to sell the Australian and New Zealand securities units it bought from ABN Amro.

Goodwin, 49, and Chairman Tom McKillop, 65, have been criticized for agreeing to pay too much for ABN Amro before the collapse of the US subprime mortgage market and global credit crunch. Banks and brokerages have posted US$497 billion in losses and raised US$357 billion in capital since the credit crunch started.

Goodwin and McKillop may need to step down, RBS shareholders including Royal London Asset Management Ltd, Rathbone Brothers Plc and SVM Asset Management have said.
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