RBS Posts Loss, Takes Dim View on Recovery

Royal Bank of Scotland Group PLC damped hopes that banks have turned a corner in the financial crisis, saying its first-half net loss widened and earnings may not recover substantially until 2011.

The 70% state-owned U.K. bank, which received a government bailout last year, reported a £1.04 billion ($1.75 billion) loss for the first half, worse than analysts had expected and in spite of cash from disposals and a £3.79 billion gain related to buying back some of its own debt below face value.(…)

RBS shares sank on the news, down 13% to 46 pence. The decline wiped out gains fueled by comments from peers Barclays PLC, HSBC Holdings PLC and Lloyds Banking Group that the worst of the crisis is past.(…)

He said profits in investment banking — which drove first-half "core" income — are likely to come down in the second half after a strong first half of higher client activity in areas such as interest rates and foreign exchange.(…)

Money set aside to cover bad loans rose to £7.52 billion from £1.48 billion in the first half of 2008, and Mr. Hester said levels will remain elevated. Analysts had forecast about £6.47 billion in total loan impairments.(…)

RBS said it aims to have a Double-A credit rating by 2013, excluding the uplift of government support.

Full WSJ article


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