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RBS expects to report 2008 loss RBS braces for first annual loss
(about 1 hour later)
Royal Bank of Scotland has signalled it expects to make a loss this financial year as it unveiled further write-downs on assets hit by the credit crisis. Royal Bank of Scotland has signalled it expects to make its first annual loss in 2008 as it unveiled more write-downs on assets hit by the credit crunch.
The beleaguered lender said bad debt charges and write-downs totalled £206m in the third quarter, on top of £5.9bn in the first half of the year.The beleaguered lender said bad debt charges and write-downs totalled £206m in the third quarter, on top of £5.9bn in the first half of the year.
RBS boss Stephen Hester told BBC News making a profit would prove difficult.RBS boss Stephen Hester told BBC News making a profit would prove difficult.
RBS also detailed plans to raise £19.7bn as part of the government's bank bail-out plan.RBS also detailed plans to raise £19.7bn as part of the government's bank bail-out plan.
RBS's third quarter write-down would have been higher, but accounting changes relating to the way securities are classified provided a boost of £1.2bn. The bank's third-quarter write-down would have been higher, but accounting changes relating to the way securities are classified provided a boost of £1.2bn.
The firm said its operating profit in the first nine months of 2008, before credit market write-downs, was 8% lower than a year earlier.The firm said its operating profit in the first nine months of 2008, before credit market write-downs, was 8% lower than a year earlier.
FROM THE TODAY PROGRAMME href="http://news.bbc.co.uk/today/hi/default.stm">More from Today programme Banks like RBS aren't supposed to make losses Robert Peston, BBC business editor href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/">Read Robert's blog
"The scale of the market disruption and the economic downturn that is happening as a consequence means that credit losses are rising very sharply," Mr Hester said."The scale of the market disruption and the economic downturn that is happening as a consequence means that credit losses are rising very sharply," Mr Hester said.
"I suspect that people may conclude that profits will be difficult to achieve this year," he added."I suspect that people may conclude that profits will be difficult to achieve this year," he added.
The firm reported in August a loss for the first half of the financial year of £691m.The firm reported in August a loss for the first half of the financial year of £691m.
Cash plan 'Momentous'
RBS said it wants to raise up to £15bn from investors by selling shares at 65.5p each. If the shares are not taken up, the government will acquire them. Mr Hester said RBS troubles stemmed from the bank's decision to lend far too much in good times.
PREFERENCE SHARES A class of shares that usually do not offer voting rights, but do offer a superior type of dividend, paid ahead of dividends to ordinary shareholders. href="/1/hi/magazine/7642138.stm">Credit crisis glossary FROM THE TODAY PROGRAMME href="http://news.bbc.co.uk/today/hi/default.stm">More from Today programme
It became far too exposed, though its investments, to disastrous sub-prime loans to US homeowners with poor credit histories. It also bought the giant Dutch bank, ABN Amro, at the height of the boom.
BBC business editor Robert Peston said it was momentous that RBS, which can trace its history back almost 300 years, was heading for its first full-year loss.
He said RBS had survived one set of multi-billion pound losses on the sub-prime phase of the credit crunch.
It would now be tested by rising impairment charges on more conventional lending as a recession made life tough for individual and companies with big debts, he added.
Dividends to resume
RBS said it wanted to raise up to £15bn from investors by selling shares at 65.5p each. If the shares are not taken up, the government will acquire them.
The government will also directly buy preference shares in the bank - worth a total of £5bn.The government will also directly buy preference shares in the bank - worth a total of £5bn.
PREFERENCE SHARES A class of shares that usually do not offer voting rights, but do offer a superior type of dividend, paid ahead of dividends to ordinary shareholders. Credit crisis glossary
Under the terms of the government agreement, dividend payouts are restricted, directors' pay limited and banks are required to pay 12% a year interest on the preference shares.Under the terms of the government agreement, dividend payouts are restricted, directors' pay limited and banks are required to pay 12% a year interest on the preference shares.
RBS said it would buy back the preference shares "as soon as it is prudent to do so", which would allow it to restart dividend payments.RBS said it would buy back the preference shares "as soon as it is prudent to do so", which would allow it to restart dividend payments.
Lloyds TSB and HBOS are also taking part in the government bank rescue plan whereas Barclays has raised cash from the Middle East. Mr Hester said he would be "disappointed" if he couldn't pay dividends again in 2010.
Lloyds TSB and HBOS are also taking part in the government bank rescue plan, whereas Barclays has raised cash from the Middle East.