Bad Debt Charges Takes Toll On RBS(RBS)
November 06, 2009 8:44 AM
According to a report from the Wall Street Journal, The Royal Bank of Scotland (NYSE: RBS) is still being hit by High Debt Charges reaching GBP 10.8 billion, up from GBP 2.76 a year earlier. For the last quarter, RBS has reported impairment losses amounting to $3.28 billion, which is up compared to the previous year’s losses of GBP 1.28 billion and down compared to the previous quarter’s $4.66 billion. This has led to an overall third quarter loss of GBP 1.8 billion compared to net profits of GBP 871 million the year before.
In a conference call, Royal Bank of Scotland Chief Executive Stephen Hester explains that "Profitability in our core businesses will recover fully only when our own actions are also complemented by more normal interest rates and bad debt experience,". Ha also adds that he believes that the company will net be profitable until 2011.
To cope, RBS is due for some major reconstruction as ordered by the European Union. The UK government has also injected GBP 25.5 billion into the bank in an effort to insure GBP280 billion of toxic assets.
As a consequence of the injected funds, the European Union has mandated that the bank breaks off assets so as to not have a competitive advantage over banks that have stayed independent. Part of the assets RBS will be selling is their insurance business. They will also be divesting their global merchant service as well as their interests in a joint project with Sempra. RBS will also be selling some branches operating in England and Wales, as well as NatWest banks in Scotland.
To read the whole article, click on the link below.
http://online.wsj.com/article/BT-CO-20091106-705847.html
