RBS bank plunges back into loss

5th November 2010, Comments 0 comments

Royal Bank of Scotland plunged back into a loss during the third quarter owing to charges linked to its massive state bailout, the bank said on Friday.

RBS posted a net loss of 1.146 billion pounds (1.311 billion euros, 1.859 billion dollars) in June-September, it said in an earnings update.

That contrasted with a profit of 257 million pounds in the second quarter, although the amount was smaller than a loss of 1.8 billion pounds during the third quarter of 2009.

The bank, which is about 80 percent owned by the state, said that much of the latest loss could be explained by an exceptional charge of 825 million pounds linked to a government insurance scheme set against risky assets.

RBS said that its operating profit, excluding exceptional items, switched into a profit of 726 million pounds after a loss of 1.042 billion pounds in the third quarter of last year.

Group chief executive Stephen Hester said the underlying results showed the bank continued "to make good progress" on the road to recovery.

"The core bank is becoming stronger. As we focus on serving customers better, profitability is also improving and rebalancing towards a more sustainable mix of business contributions.

"At the same time, the legacy risks and losses in non-core are being worked out effectively and our ambitious restructuring efforts continue apace."

RBS has axed more than 27,000 jobs since October 2008 when it was slammed by the global financial crisis and subsequently rescued by the taxpayer.

It recently agreed to sell 318 retail branches to Spanish banking group Santander after an EU demand that it cut operations in exchange for the billions of pounds of state aid it has received.

"At RBS, the long hard slog continues for the beleaguered bank, yet there are some signs of optimism," Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said following Friday's results.

"The investment banking arm continues to struggle in a difficult environment, whilst the increase in the value of the bank's own debt is a concerning development.

"Set against this, at an operating level RBS is making some progress and the complex restructure of the entire business seems to be at the top of the bank's agenda.

"Even so, from an investment perspective the government stake is a major overhang on the shares and, as yet, there seems little prospect of a return to a dividend payment," Hunter added.

In morning trade, RBS traded up 0.86 percent at 45.82 pence on London's FTSE 100 index, which was down 0.25 percent.

© 2010 AFP

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