Royal Bank of Scotland swung into the red yesterday as the taxpayer-controlled bank took a £733m hit on Greek bonds and revealed plans to cut about 2,000 jobs.
The bank, which is 83 per cent owned by the taxpayer, reported a £794m loss for the first half, after taking a £2.5bn writedown on its Irish debt and making an £850m provision for the cost of compensating customers it mis-sold payment protection insurance (PPI).
The loss compared to a £1.1bn pre-tax profit a year earlier, when the bank returned to the black.
Speaking shortly after a 20 per cent dive in RBS's shares – which later recovered some ground – chief executive Stephen Hester acknowledged that huge "volatility and uncertainty in the markets" made for a "difficult and worrying environment".
Against a deteriorating economic backdrop, Mr Hester conceded that RBS would cut about 2,000 jobs over the next year to 18 months, most of them in investment banking. Some of the redundancies would relate to the ongoing integration of the ABN Amro business acquired in 2009, he added.
Mr Hester said that RBS's future growth was "likely to be slower than we'd hoped" as a result of the huge levels of uncertainty created by the European and US debt crises. He urged markets to stay calm, warning that the impact of a widespread loss of confidence would be far more damaging to RBS – and the global economy as a whole – than the bank's exposure to sovereign debt.
"The best thing to do is to keep your head down, be calm and be purposeful," Mr Hester said. "The issue is more of confidence than direct exposure. The majority of eurozone banks are in decent shape and the weakness tends to be in smaller and more regional banks."
He added his voice to the growing chorus of criticism of pending reforms from banks this week, warning that they could hit Britain's economic recovery, by raising the cost and availability of credit at a vital time. Sir John Vickers' Independent Commission on Banking (ICB) will flesh out the details next month of banking reforms to increase competition and stability in the sector. He has previously suggested a reform requiring banks to "ringfence" their retail operations from risky investment banking operations and to hold more capital – at considerable expense to the banks.
Mr Hester described the move as the "wrong reform at the wrong time". He warned: "It could increase the risk for the UK banking system and cost everyone a lot of money, which I don't think is the objective."
RBS shares fell by 7 per cent to close at 28.15p last night, taking the total drop over the week to 21 per cent.Reuse content