RBS posts quarterly loss of £528 mln

6th May 2011, Comments 0 comments

Royal Bank of Scotland said on Friday that its net loss more than doubled to £528 million (594 million euros, $866 million) in the first quarter as the state-rescued bank was hit by large bailout costs.

The loss after tax for the three months to March 31 compared with a net loss of £248 million in the first quarter of 2010, RBS said in an earnings statement.

RBS is 83-percent owned by the British government after a state-bailout triggered by the 2008 global financial crisis.

It said on Friday that the net loss came after the Scottish lender was hit by a charge of £469 million linked to the government's Asset Protection Scheme (APS), or state insurance set against risky assets.

However the bank's underlying performance showed improvement, with operating profit rising 19 percent to £1.05 billion in the first quarter of 2011. The news helped send shares in RBS soaring in London trade.

"RBS first quarter results show progress continuing," the bank's chief executive Stephen Hester said in the earnings statement.

"We are strongly focused on serving customers well while building capabilities to improve further. Financial strength and resilience continue to show sharp improvement as core business profitability broadens and non-core risks are reduced.

"This recovery is also allowing us to absorb higher Irish impairments and substantially increased regulatory demands, and to self-fund other 'bills from the past' such as restructuring, disposals and the cost of APS support," Hester added.

Shares in RBS surged 6.27 percent to stand at 43.02 pence in midday trading on London's benchmark FTSE 100 index, which was down slightly.

"Given the headwinds of increasing Irish impairments, APS repayments and a revaluation of its own debt, the update actually implies some improving prospects for the beleaguered bank," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.

"In all, there are some signs that the recovery continues at RBS, even if numerous and significant hurdles remain. The share price performance has reflected this plethora of risks, having dropped 20 percent over the last year as compared to a 13 percent gain for the wider FTSE 100," he added.

RBS was updating the market on its performance one day after another state-rescued lender, Lloyds Banking Group, said it had plunged into a loss during the first quarter.

LBG fell into the red after setting aside £3.2 billion to compensate customers who were mis-sold payment insurance.

British banks last month lost a High Court appeal against tighter regulation of payment protection insurance (PPI), which gives insurance for consumers if they fail to meet repayments on credit products.

RBS said on Friday that it was "unable reliably to estimate any potential financial liability, although it could prove to be material".

PPI became controversial after it was revealed that numerous consumers had been sold the insurance without understanding that the cost was being added to their loan repayments.

Britain's Competition Commission has since banned simultaneous sales of PPI and credit products.

© 2011 AFP

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