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RBS downbeat despite £15m profit | RBS downbeat despite £15m profit |
(20 minutes later) | |
Royal Bank of Scotland Group, which is 70%-owned by taxpayers, has reported a pre-tax profit of £15m for the first six months of the year. | Royal Bank of Scotland Group, which is 70%-owned by taxpayers, has reported a pre-tax profit of £15m for the first six months of the year. |
The statement from RBS was downbeat, highlighting the £1bn loss after paying tax and dividends to the government and describing the results as "poor". | The statement from RBS was downbeat, highlighting the £1bn loss after paying tax and dividends to the government and describing the results as "poor". |
The investment banking division fared well, making about a £5bn profit, while high street banking had a harder time. | The investment banking division fared well, making about a £5bn profit, while high street banking had a harder time. |
RBS also said it had written off £7.5bn of assets such as bad debts. | RBS also said it had written off £7.5bn of assets such as bad debts. |
See graph of this week's bank results | See graph of this week's bank results |
'Bad dream' | |
The bank's shares fell sharply on the back of the results, ending the day down 12.1%, although they had closed up 9.8% on Thursday. | The bank's shares fell sharply on the back of the results, ending the day down 12.1%, although they had closed up 9.8% on Thursday. |
"I think it's a reality check, frankly," said analyst Leigh Goodwin at Fox-Pitt Kelton. | |
"We were hoping, after the optimism of the last few days, that maybe with a good performance [in investment banking] and some stabilisation of credit, we might be feeling it was all a bad dream with Royal Bank. But we're back to reality." | |
Unlike Lloyds Banking Group earlier in the week, RBS did not say it had seen the peak of the write-offs, with chief executive Stephen Hester saying in a statement that they are "set to stay high for a while". | Unlike Lloyds Banking Group earlier in the week, RBS did not say it had seen the peak of the write-offs, with chief executive Stephen Hester saying in a statement that they are "set to stay high for a while". |
RBS chief executive Stephen Hester: 'We will have difficult times for at least two years' | RBS chief executive Stephen Hester: 'We will have difficult times for at least two years' |
But Mr Hester later told the BBC he was confident of leading the turnaround at RBS. | But Mr Hester later told the BBC he was confident of leading the turnaround at RBS. |
"We are now confident we can rebuild RBS," he said, undertaking to make sure taxpayers make a profit on their investments in the bank within five years. | "We are now confident we can rebuild RBS," he said, undertaking to make sure taxpayers make a profit on their investments in the bank within five years. |
He also warned that "overall results may not substantially improve until 2011 and full recovery will take time. | |
There will be no miracle cure. There will be a couple of years of heavy lifting ahead, both for RBS and for the world economy." | |
Loans to businesses | Loans to businesses |
BBC business editor Robert Peston pointed out that the total loans to small businesses had fallen £400m in the first six months of the year. | BBC business editor Robert Peston pointed out that the total loans to small businesses had fallen £400m in the first six months of the year. |
But Mr Hester denied that this meant the bank was failing to meet the undertakings it had given to lend more to small businesses after receiving the government bail-out. | But Mr Hester denied that this meant the bank was failing to meet the undertakings it had given to lend more to small businesses after receiving the government bail-out. |
"This seems a strange thing for a banker to say: unfortunately people are also paying us back and so more people in small-business-land paid us back this year than have taken new loans from us," he said. | "This seems a strange thing for a banker to say: unfortunately people are also paying us back and so more people in small-business-land paid us back this year than have taken new loans from us," he said. |
"But 85% of all small businesses that asked us for a loan got it in the last six months." | "But 85% of all small businesses that asked us for a loan got it in the last six months." |
RBS profits were boosted by a £3.8bn profit from buying back the bank's own debt when the banking crisis made it cheap. | RBS profits were boosted by a £3.8bn profit from buying back the bank's own debt when the banking crisis made it cheap. |
Mr Hester said that he had reduced the size of RBS by 26% or £574bn so far this year, which has meant selling some businesses and cutting thousands of jobs. | Mr Hester said that he had reduced the size of RBS by 26% or £574bn so far this year, which has meant selling some businesses and cutting thousands of jobs. |
Insurance scheme | Insurance scheme |
In the whole of 2008, RBS reported the biggest annual loss in UK corporate history, losing £24.1bn, mostly due to a £16.2bn write-down of assets, including on the value of ABN Amro, which it bought in 2007. | In the whole of 2008, RBS reported the biggest annual loss in UK corporate history, losing £24.1bn, mostly due to a £16.2bn write-down of assets, including on the value of ABN Amro, which it bought in 2007. |
It is less than a month since the body set up to manage taxpayers' stakes in banks, UKFI, warned that it would be 'challenging' to sell those stakes When will we get our money back? | It is less than a month since the body set up to manage taxpayers' stakes in banks, UKFI, warned that it would be 'challenging' to sell those stakes When will we get our money back? |
The government took a £20bn stake in RBS in October to prevent its collapse. | The government took a £20bn stake in RBS in October to prevent its collapse. |
And the stake is expected to increase when the new Asset Protection Scheme comes into force. | |
About 70% of the RBS assets affected by the write-downs are likely to end up being covered by the insurance scheme. | About 70% of the RBS assets affected by the write-downs are likely to end up being covered by the insurance scheme. |
Return to story | Return to story |