RBS in the red, suffers £678 million loss in Q2

RBS Suffered Losses of 678m Pounds in Q2

RBS Suffered Losses of 678m Pounds in Q2

Anticipated losses on Greek government bonds and non-performing Irish loans took its toll on the second quarter results of the Royal bank of Scotland as the lender reported £678 million pre-tax losses.

The majority tax-payer owned bank, the government currently owns 83 percent stake, suffered at the stock exchange yesterday when it hit its two year low. The government, seeking to dilute its ownership and keen to generate funds, may have to wait longer before it can exit at a profit.

“The banks are not going to make a profit in this sort of environment and their provisions are going to get worse. RBS has got a lot of problems. The possibility that we are heading into another credit crunch is very high,” said John Smith, a fund manager at Brown Shipley.

“These are markets to be careful, not to try and be a hero,” said chief executive of RBS Stephen Hester, adding the lender’s investment banking division has become cautious and defensive.

Bad loans of £2.3 billion hit the bank’s profit hard, which posted a profit of £1.17 billion last year. It also wrote-off £733 million to cover anticipated losses on its £1.45 billion Greek bond portfolio.

Ulster Bank, its Irish subsidiary, factored in a £1.25 billion impairment charge for the 2nd quarter, £49 million less than the previous one.

The earnings got further dented after the bank made provisions of £850 million for payment protection insurance (PPI) mis-selling claims.

In an effort to spruce up operations, RBS has cut 27,500 jobs, including thousands at its GBM investment banking operations, exited from 12 countries and cut its client base to 5,000 from 26,000.

Taxpayer backed RBS had received about £45 billion from the government during the credit crisis in 2008-09. Its rivals HSBC and Barclays have made faster turnarounds and reported profits of £11.5 billion and £2.6 billion, respectively.

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