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RBS warns of two tough years
By Robert Barr |
May 9, 2009, Saturday
|
Print Edition
Print Edition
THE Royal Bank of Scotland reported yesterday a first-quarter loss of 857 million pounds (US$1.29 billion) as writeoffs increased despite a rise in revenue and warned of two tough years ahead.
The loss compared with a profit of 245 million pounds a year earlier.
Though yesterday's report was laced with caution, investors bid up RBS shares by 15 percent to 47.3 pence on the London Stock Exchange.
The apparent frankness about the difficulties played well in the market, said Keith Bowman, of Hargreaves Lansdown Stockbrokers. "Anything that reinforces trust is well received."
Bailed-out RBS, which is now 70.3-percent owned by the government, took a charge of 2.86 billion pounds against bad debts in the first quarter on top of other writedowns of 797 million pounds.
Previously disclosed losses brought total impairment losses and credit market writedowns to 4.9 billion pounds, the bank said.
Impairment losses have grown to 1.3 percent of the loan portfolio, up from 0.9 percent at the end of 2008. Chief executive Stephen Hester said additional impairments of nearly 3 billion pounds were likely in each of the next three quarters.
Difficult conditions
"We expect credit impairment losses to continue to reflect very difficult economic conditions seen in the second half of 2008 and the first quarter of 2009, and the resultant increase in non-performing loans across all sectors," the bank said in its report.
The bank's top line was robust, with a 26-percent rise in revenue to 9.7 billion pounds led by a 131-percent jump in income from its Global Banking and Markets division.
Pretax loss was 44 million pounds, compared to a 479-million pounds profit in the first quarter of 2008.
"Some commentators are beginning to talk about economic recovery; we remain cautious and continue to plan and manage our businesses in the full expectation that both 2009 and 2010 will be very tough years for RBS," Hester said yesterday.
The loss compared with a profit of 245 million pounds a year earlier.
Though yesterday's report was laced with caution, investors bid up RBS shares by 15 percent to 47.3 pence on the London Stock Exchange.
The apparent frankness about the difficulties played well in the market, said Keith Bowman, of Hargreaves Lansdown Stockbrokers. "Anything that reinforces trust is well received."
Bailed-out RBS, which is now 70.3-percent owned by the government, took a charge of 2.86 billion pounds against bad debts in the first quarter on top of other writedowns of 797 million pounds.
Previously disclosed losses brought total impairment losses and credit market writedowns to 4.9 billion pounds, the bank said.
Impairment losses have grown to 1.3 percent of the loan portfolio, up from 0.9 percent at the end of 2008. Chief executive Stephen Hester said additional impairments of nearly 3 billion pounds were likely in each of the next three quarters.
Difficult conditions
"We expect credit impairment losses to continue to reflect very difficult economic conditions seen in the second half of 2008 and the first quarter of 2009, and the resultant increase in non-performing loans across all sectors," the bank said in its report.
The bank's top line was robust, with a 26-percent rise in revenue to 9.7 billion pounds led by a 131-percent jump in income from its Global Banking and Markets division.
Pretax loss was 44 million pounds, compared to a 479-million pounds profit in the first quarter of 2008.
"Some commentators are beginning to talk about economic recovery; we remain cautious and continue to plan and manage our businesses in the full expectation that both 2009 and 2010 will be very tough years for RBS," Hester said yesterday.
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