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RBS reports it's biggest H1 loss ever, though many analysts expected worse
Royal Bank of Scotland fell to a first-half loss of £691 million , one of the biggest losses in UK corporate history, though not as bad as expected, after taking a £5.9 billion writedown on the value of risky assets.
RBS, Britain's second-biggest bank, today said it swung to a loss from a £5.1 billion profit a year ago after being hit by the writedowns on credit products, which were in line with previous guidance but partially offset by an £812 million reduction in the value of the debt it carried.
The bank had been expected to report a £1.2 billion loss, based on the average of five analysts' forecasts.
"It has been a chastening experience and reporting a pre-tax loss of £691 million is something I and my colleagues regret very much," Chief Executive Fred Goodwin said.
He said difficult conditions in financial markets "look set to be compounded by a deteriorating economic outlook".
He continued: "Commercial property accounts for 15% of our loan book, and while there have been concerns over conditions in this sector in some countries, our portfolio remains well diversified, both by geography and by type of development, with only 3% of our UK lending advanced at loan to value ratios above 85%. We have for several years maintained strict limits on lending for speculative developments, and in our UK book only 1% of commitments secured on commercial property is for speculative development.
Our UK mortgage portfolio also remains strong, with an average LTV of 66% on new business and of 49% on our entire book. Impairments remain negligible, representing 0.04% of UK mortgage balances. We have never been prominent in the buy-to-let segment, and this category represents, as we stated in June, only 1% of our UK loan book, with an average LTV of 56%."
The bank said bad debts on mortgages and other loans jumped 58% in the six months to £1.5 billion .
RBS has had a troubled year and in June it was forced to raise £12 billion in the biggest ever rights issue, to repair a balance sheet stretched by last year's purchase of parts of ABN AMRO and the writedowns.
It said its core tier 1 capital ratio was 5.7% at the end of June and will be above 6% by the end of the year.
The bank said its disposal plans were on track, and sales already made would contribute 1 billion to capital, but it did not update on the auction of its insurance business.
RBS said its underlying profit fell 3% to £5.1 billion .
RBS, Britain's second-biggest bank, today said it swung to a loss from a £5.1 billion profit a year ago after being hit by the writedowns on credit products, which were in line with previous guidance but partially offset by an £812 million reduction in the value of the debt it carried.
The bank had been expected to report a £1.2 billion loss, based on the average of five analysts' forecasts.
"It has been a chastening experience and reporting a pre-tax loss of £691 million is something I and my colleagues regret very much," Chief Executive Fred Goodwin said.
He said difficult conditions in financial markets "look set to be compounded by a deteriorating economic outlook".
He continued: "Commercial property accounts for 15% of our loan book, and while there have been concerns over conditions in this sector in some countries, our portfolio remains well diversified, both by geography and by type of development, with only 3% of our UK lending advanced at loan to value ratios above 85%. We have for several years maintained strict limits on lending for speculative developments, and in our UK book only 1% of commitments secured on commercial property is for speculative development.
Our UK mortgage portfolio also remains strong, with an average LTV of 66% on new business and of 49% on our entire book. Impairments remain negligible, representing 0.04% of UK mortgage balances. We have never been prominent in the buy-to-let segment, and this category represents, as we stated in June, only 1% of our UK loan book, with an average LTV of 56%."
The bank said bad debts on mortgages and other loans jumped 58% in the six months to £1.5 billion .
RBS has had a troubled year and in June it was forced to raise £12 billion in the biggest ever rights issue, to repair a balance sheet stretched by last year's purchase of parts of ABN AMRO and the writedowns.
It said its core tier 1 capital ratio was 5.7% at the end of June and will be above 6% by the end of the year.
The bank said its disposal plans were on track, and sales already made would contribute 1 billion to capital, but it did not update on the auction of its insurance business.
RBS said its underlying profit fell 3% to £5.1 billion .
Fri, 8th Aug 2008