The Royal Bank of Scotland (RBS) posted a wider first-half net loss yesterday as sluggish retail and corporate business wiped out strong gains in investment banking. The bank was hit by £7.5 billion (US$12.6 billion) in bad debts.
RBS, in which the government now holds a 70.3 percent stake, reported a net loss of £1.04 billion in the first half, compared with a loss of £827 million a year ago.
Revenue rose 58 percent 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 said that its writedowns on bad debts had increased to £7.5 billion. The results were also boosted, however, by a £3.8 billion 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 analyzed 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 ... implementation is well under way, though uncertainties remain,” he said.
RBS, the UK’s biggest bank in balance sheet terms, earned the dubious honor of posting the largest annual loss in UK corporate history last year — a £24.1 billion black hole fed by the bank’s aggressive acquisition spree of recent years.
The very public downfall of RBS, a household name in the UK where it was 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 in toxic assets into a government insurance program. The bank, however, continued to court controversy when anger erupted over a £16 million pension pot bestowed on its disgraced former chief executive Fred Goodwin.
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