RBS to report record British loss

THE British Government looks set to increase its stake in the Royal Bank of Scotland group (RBS) — stopping just short of nationalising the business — which is set to report the biggest ever annual loss for a publicly-quoted British company next month.

RBS — which is the second biggest bank in Britain and operates in Ireland through its ownership of Ulster Bank and First Active — said in a trading update yesterday that total losses for 2008 are likely to come in above the £20 billion (€22.1bn) mark, £5bn (€5.5bn) more than the previous record loss posted by mobile phone network provider Vodafone three years ago.

Final figures for last year will be published by RBS at the end of next month.

However, in its pre-close trading update, the bank said that estimated basic losses for the year before exceptional goodwill impairments are taken into consideration will amount to somewhere between £7bn (€7.7bn) and £8bn (€8.8bn).

The big hit will come, however, in the form of a goodwill impairment charge, related in part to RBS’ purchase of Dutch bank ABN AMRO last year, totalling somewhere between £15bn (€16.5bn) and £20bn (€22bn).

RBS’ basic losses for the year are being attributed to “particularly challenging” credit and market conditions, by the group’s management.

The group added that credit impairment losses in its regional markets division — which includes the Ulster Bank and First Active businesses here — will be approximately £3.5bn (€3.9bn) for the year.

“These are approximately £400m higher than anticipated, reflecting a further but more limited deterioration than seen in GBM [global banking and markets], in the credit environment within our UK, US and Irish retail and commercial portfolios,” the group said.

With regard to the British government’s stake in the group, RBS has also announced it has reached agreement for the British Treasury to replace £5bn worth of preference shares in the bank with new ordinary shares — a move which will see the British Government’s stake in the business grow from 58% to 70%.

That move forms part of the British government’s £200bn (€220bn) second bank bail-out, initially announced over the course of the weekend.

Full nationalisation of RBS had been mooted as a possibility, on Sunday.