RBS slides into red on Greek losses, cuts 2,000 jobs

5th August 2011, Comments 0 comments

State-rescued Royal Bank of Scotland said Friday that it fell into a net loss of £1.4 billion in the first half on exposure to the struggling Greek economy and said it would cut around another 2,000 jobs.

RBS, more than 80 percent owned by the government, said losses after tax stood at £1.425 billion ($2.32 billion, 1.64 billion euros) in the six months to June. That contrasted with a net profit of £9.0 million a year earlier.

The British lender was also hit by provisions to compensate customers judged to have been mis-sold insurance policies.

Chief executive Stephen Hester later announced "there would be more job cuts to come" over the next 12-18 months, which would be in the region of 2,000 -- on top of the more than 27,000 positions axed by the bank since 2008.

RBS booked a loss of £897 million in the second quarter due to a previously-announced £850 million charge for insurance claims and a £733 million provision related to Greek government bonds. RBS posted a net profit of £257 million in the second quarter of 2010.

"RBS's second quarter results show the group's restructuring momentum continues whilst core business performance is resilient in challenging market conditions," Hester said in an earnings statement.

"There is no shortcut to achieving our goals ... Economic and regulatory headwinds may be challenging but the momentum that our people and restructuring actions have sustained thus far in the RBS recovery plan should continue to stand us in good stead," he added.

Hester hinted that job losses would occur in the investment banking division as he he spoke to reporters at the end of a week in which RBS's much stronger-performing rivals HSBC and Barclays axed a combined 33,000 staff.

"If the external environment changes and it looks like an area that is changing, both in terms of slower economic growth and indeed specific regulatory pressures, we will need to respond again" on costs, Hester told a conference call.

"The investment banking area is one such area where it looks as if we will need to respond again on costs."

RBS has cut thousands of jobs since October 2008 when it was slammed by the global financial crisis and subsequently rescued by the taxpayer. It currently employs about 148,000 people worldwide.

The group's share price was down 4.0 percent at 29 pence in afternoon deals on London's FTSE 100 index, which fell 2.0 percent on fears over the weakening economic outlook.

The Edinburgh-based lender was ravaged by the 2008 global credit crunch and the takeover of Dutch giant ABN Amro at the top of the market in 2007.

That led to RBS being rescued with 45 billion pounds of British government money -- the biggest single bank bailout in the world.

The bank's results were published a day after another bailed-out British lender, Lloyds, announced it too had plunged into massive losses in the first half, also after setting aside billions of pounds to compensate customers.

British banks in April lost a high court appeal against tighter regulation of payment protection insurance which covers consumers who fail to meet repayments on credit products such as personal loans, mortgages or payment cards.

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 has since banned simultaneous sales of PPI and credit products.

© 2011 AFP

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