RBS posts second-biggest loss in UK banking history

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Britain’s second-largest bank, Royal Bank of Scotland (RBS), has today posted a first-half pre-tax loss of £691 million - its first loss in 40 years and the second-biggest loss in UK banking history.

Lloyds TSB holds the record for the first-biggest loss when it posted a £715 million loss in 1989, primarily due to difficulties in Latin America.

RBS, which owns NatWest bank, has written off £5.9 billion as a result of the credit crunch and from investments at Dutch bank ABN Amro, bought by RBS and a consortium last year.

However, the loss is not quite as severe as analysts warned, many predicted that RBS would post first-half losses of between £1.2 and £1.7 billion.

Rival banks to post huge losses include Barclays Bank, who yesterday revealed that pre-tax profits fell 33% in the first six months to the end of June following more write-downs.

Last week, Lloyds TSB and HBOS revealed significant falls in profits due to rising levels of bad debt.

Commenting on the losses, Fred Goodwin, RBS’ chief executive, said reporting a shortfall of £691 million was something he and his colleagues regret very much and he warned that a deteriorating economic outlook would compound problems in financial markets.

RBS recently carried out a £12 billion rights issue, which was the biggest in UK corporate history. Fred Goodwin and Tom McKillop, chairman of RBS, have both been subject to shareholder scrutiny after the rights issue.

The bank is on the lookout for three new non-executive directors to improve its board following shareholder concerns.

RBS recently completed the sale of Angel Trains to a consortium led by Babcock & Brown, the Australian infrastructure group.

The sale of Angel Trains delivered a profit of between £250-£300 million to RBS while supermarket giant Tesco recently bought RBS‘ 50% share in Tesco Personal Finance (TPF) in a deal worth £950 million.

Finally, it is believed that RBS is close to selling an Australian corporate-finance business, acquired when it took over ABN Amro, to Commonwealth Bank of Australia.

Shares in RBS rose 2% in early trading today to 238.5p, shares in the bank have lost around half their value over the last 12 months alone.

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