Scandals catapult RBS deep in the red as state-backed bank plunges to £1.5bn loss

| August 4, 2012 | 0 Comments

James Salmon

16:16 EST, 3 August 2012


16:16 EST, 3 August 2012

Royal Bank of Scotland chief executive Stephen Hester hit back at calls from ministers to fully nationalise the state-backed bank as it plunged to a loss of £1.5billion for the first half of the year.

A faction within the Coalition, spearheaded by Business Secretary Vince Cable, wants the Treasury to stump up an extra £5billion to buy the 18 per cent stake not owned by British taxpayers.

Hester claimed he had not been involved in any discussions but said: ‘One of the arguments behind this was about having a good bank versus a bad bank. But now the vast majority of our toxic assets have been hived off.’

Under fire: RBS boss Stephen Hester has hit back at critics who claim the bank should be fully nationalised

Under fire: RBS boss Stephen Hester has hit back at critics who claim the bank should be fully nationalised

He added: ‘I’m not sure why the state would want to take on our remaining toxic assets and other problems we have.’

RBS has come under fire for failing
to lend to small businesses after it emerged it was responsible for
banks undershooting Government-imposed ‘Project Merlin’ lending targets
by more than £1billion. Hester said: ‘RBS is trying to lend as much as
we prudently can. We have just written off tens of millions of pounds
after making loans we shouldn’t have, so we are sensitive to it.’

Lending to non-financial firms fell 6.1 per cent to £41.5billion in the first half of 2012, with the bank blaming an 18 per cent slump in applications.

The embattled boss admitted the
reputation of bankers has ‘hit a new low’ as it set aside £310million
compensation to pay for its recent IT meltdown, mis-selling payment
protection insurance to customers and toxic ‘interest rate swap’ loans
to small businesses.

He also confirmed that he had sacked a
number of traders for rigging crucial Libor interest rates as the
lender is dragged deeper into the latest scandal sweeping the industry.

Excluding the provisions and  a
£2billion charge on its own debt, RBS said it made an operating profit
in its ‘core bank’ of £3.2billion, down 19 per cent.

Analysts dismissed the debt charge as an accounting quirk that reflects the theoretical cost of buying back its own debt.

Group operating profit was
£1.8billion, down 6.7 per cent, while ‘headwinds’ in the economy
prompted profits at the high street banking arm to fall 13 per cent to £914m.

But the lender hailed progress in
cleaning up its toxic balance sheet, hiving off £22billion in ‘non core’
assets, including RBS Aviation Capital. Losses on bad loans fell 37 per cent from £4.2billion to £2.6billion.

The lender revealed it is on target
to reach another important milestone in the second half of the year –
exiting the state-backed Asset Protection Scheme which insures
£300billion of its toxic assets.  

It has paid £2.5billion in premiums but is now confident it will not need to call on the scheme again.

Here’s what other readers have said. Why not add your thoughts,
or debate this issue live on our message boards.

The comments below have not been moderated.

dont worry Stephen your bonus is safe

Dont worry about it too much Mr Hester about the banks losses your bonus is safe, and If the formula for working bonuses out on failure is true to form you my boy are in for the biggest bonus yet

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

Leave a Reply

You must be logged in to post a comment.

Get Adobe Flash player