Bad debts at RBS 'could soar to £12bn'

Bad debts at part-nationalised Royal Bank of Scotland could soar to almost £12 billion this year, the bank said today.

RBS, which is 70-per-cent-owned by the taxpayer, posted loans losses of £2.9 billion for the first quarter of 2009 but directors said full-year bad debts could be "at least" four times as high.

The warning came as chief executive Stephen Hester sought to dampen expectations of a swift recovery, saying he had seen no "green shoots" on sour loans and that this year and next would be "very tough".

The downbeat comments - a day after fellow struggler Lloyds Banking Group said bad debts could jump more than 50 per cent - underlines the growing impact of recession on banks even though the danger of collapse has passed.

RBS posted a pre-tax loss of £44 million as record income driven by its buoyant investment banking business was offset by the group's surge in bad debts and the squeeze of record low interest rates on margins.

After tax, dividend payouts to the Government, and payments to partners on the sale of its Bank of China stake, losses widened much further to £857 million.

Under this measure, RBS posted a UK record £24.1 billion loss last year after writing off more than £16 billion on its disastrous deal for Dutch bank ABN Amro.

Markets had been braced for much worse and shares in RBS soared 14 per cent, but Mr Hester warned against over-exuberance - saying the bank's path back to health "will take years not months".

"I think it is very important that people do not get carried away in the short term with over-optimism," he said.

The chief executive, who is undertaking a mammoth restructuring of the bank to shrink the RBS and reduce its risks, also declined to predict when the bank would return to profit.

"It's not really in our hands, it's in the hands of the economy and what it does to our loan books," he said.

The uncertainty of last year's banking crisis had given way to a "severe but recognisable" recession, Mr Hester said.

The figures showed investment banking impairments reached £1.37 billion, while commercial and retail banking loan losses more than doubled to £1.46 billion.

A further £2.1 billion hit from credit market losses sent total impairment to almost £5 billion.

The £2.9 billion in bad debt charges compared with just £656 million a year earlier in the tougher economic climate for both businesses and consumers. Impairment charges as a percentage of its loans rose to 1.33 per cent in the first quarter.

RBS is insuring more than £300 billion of toxic debts in a taxpayer-backed insurance scheme but is liable for the first £19.5 billion of any loss.

The bank said it expected up to 85 per cent of the impairments and credit market losses announced today to count towards its first loss - meaning the bank will already have burnt through about £4 billion of its buffer.

Last month RBS announced up to 9,000 job cuts - half of which will fall in the UK - bringing the total axed in December to more than 15,000.

Mr Hester, who completed the clear-out of senior directors from former chief executive Sir Fred Goodwin's regime this week, said more cuts were on the way, but declined to give further details.

"We would expect the overwhelming majority of what we need to do to be carried out over this year and next, but sadly we're not finished yet," he said.

Richard Hunter, head of equities at Hargreaves Lansdown, said: "RBS is a radically different organisation from just a year ago. A 70 per cent-plus gain in the share price over the last three months underlines investors' new found trust in management and the bank's future.

"Nonetheless, management itself is stressing the magnitude of the task ahead, with the bank's future being closely tied to that of the UK economy."

Arts and Entertainment
books
News
Dr Alice Roberts in front of a
people
Voices
Nigel Farage arrives for a hustings event at The Oddfellows Hall in Ramsgate on Tuesday
voicesA defection that shows who has the most to fear from the rise of Ukip
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
PROMOTED VIDEO
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Life and Style
Brave step: A live collection from Alexander McQueen whose internet show crashed because of high demand
fashionAs the collections start, Alexander Fury finds video and the internet are proving more attractive
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution