RBS posts £678m loss as Greek and Irish debts sour

Royal Bank of Scotland slid to a pre-tax loss of £678m in the second quarter, hit by losses on Greek government bonds and Irish customers still struggling to repay loans.

The loss compared with profits of £1.17bn a year ago and came as impairments on bad loans rose to almost £2.3bn from £2bn in the first quarter of this year but eased from £2.5bn a year earlier.

RBS wrote off £733m to cover anticipated losses on its £1.45bn Greek bond portfolio.

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It also said the impairment charge at its Ulster Bank operations in Ireland, where consumers are grappling with a housing market collapse, was £1.25bn, just £49m better than in the first quarter.

Earnings at RBS, 83 per cent owned by the government after a bailout during the credit crisis, were also undermined by a previously announced £850m provision to cover the costs of compensating customers mis-sold payment protection insurance by banks.

Overall that left RBS with an £897m net loss, worse than the £424m forecast by analysts at WestLB and broadly in line with the £800m predicted by brokerage Keefe, Bruyette & Woods.

The result followed a grim set of results from larger rival Lloyds on Thursday when it reported a first half pretax loss of £3.25bn on the back of mis-selling charges and losses in Ireland.

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Shares in Lloyds slid on the news, making any profitable sell down of the Government’s 41 per cent stake acquired after a credit crisis bailout an even more distant prospect.

RBS stock, which closed at 30.28 pence on Thursday, is also a long way short of the 49.9 pence at which the British taxpayer effectively bought its stake.

Group income in the second quarter fell five per cent versus a year earlier to just under £7.8bn as the bank pointed to a drop in revenue at its GBM investment banking operations, citing heightened risk aversion among clients.

“GBM seems likely to experience activity levels below those targeted while markets remain anxious,” the bank said in a statement.

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The bank incurred lower staff costs in GBM, however, helping second quarter costs fall six per cent from the previous quarter.

RBS has cut 27,500 jobs, including thousands of investment bankers. It has scaled back its GBM business, reducing its client base to 5,000 from 26,000 before the financial crisis and exiting 12 countries.