Because Of Provisions, RBS Posts 1.8 Bln Pound Losses

The Royal Bank of Scotland Group Plc. (RBS), the largest Government-controlled bank in Britain, has reported losses in the third quarter of the year, because of provisions in the amount of 3.3 billion GBP (5.5 billion USD) created for bad loans and writedowns.

The RBS posted a net loss of 1.8 billion GBP, plunging from a profit of 871 million GBP in the third quarter of 2008. Operating losses amounted to 1.5 billion GBP in the reporting period, down from 3.5 billion GBP in the second quarter, indicating that RBS is starting to get a grip of their spending.

RBS Chief Executive Stephen Hester expressed hope that the bank would return to profit in 2011. Nine months through this year, the bank logged impairments of some 10.8 billion GBP. Commenting on the near future, Hester said recovery "would be a marathon and not a spring." He had said in August that the bank"s numbers would be poor for another two years, because of the effects of the ongoing recession.

The RBS has cut roughly 20,000 jobs since Hester took over as Chief Executive in 2008. In February 2009, the bank announced plans to transfer toxic assets worth 540 billion GBP, including derivatives and commercial and residential property loans, to a new division.

The British Treasury recently announced plans to give RBS some 25.5. billion GBP, thus bringing the total governmental rescue bill for the troubled RBS to 45.5 billion GBP, the most substantial bailout scheme received by a bank worldwide. Following this capital injection, the British Government"s stake in the bank will increase from 70 per cent to over 84 per cent.

In order to secure the European Union"s approval for this scheme, the RBS will sell its insurance unit, over 300 branches, an investment banking unit and a credit card payment unit. Also as a part of this agreement with the European authorities, the RBS is planning to sell its majority stake in RBS Sempra Commodities LLP over the next four years.

The unit generated an operating profit of 209 million GBP in 2008 against a turnover of 765 million GBP. The RBS bought 51 per cent into this company from Sempra Energy in April 2008 and accepted to retain control over it until April 2012.