Royal Bank of Scotland yesterday said bad debts were "bottoming out" but the bank expects to continue losing money into next year.
The bank, releasing its third-quarter results, is also likely to miss targets agreed with the Government for lending to businesses. But Stephen Hester, chief executive, made no apology for this when he said: "We are making credit available to people who can pay us back. Borrowing is not the route to economic recovery."
The bank – in which the taxpayer holds an 84 per cent stake – reported an operating loss of £1.5bn, against £3.5bn the previous quarter. Loan losses came in at £3.3bn, down from £4.7bn the previous quarter, but still sharply ahead of the £1.2bn recorded during the third quarter of last year.
RBS also gave details of the £282bn of risky assets that will be covered under the Government's asset protection scheme. It includes more than a third of UK retail loans and mortgages. The biggest impairment losses in the quarter came from the bank's UK retail operation, which racked up £404m of bad debts. Despite this, targets for mortgage lending are likely to be met.
Under the latest bailout, the Treasury will inject a further £25.5bn of taxpayers' money into RBS – on top of the £20bn injected last year – along with a further £8bn for emergencies only.
Addressing the issue of staff morale, Mr Hester talked of the "discrimination" that staff were suffering compared with what they might face if they were to move to banks with less toxic brands. He said departures would make the job of paying back taxpayers harder, but insisted that the bank was "on track" to do that, and paid tribute to staff opting to tough it out with the bank.
Mr Hester said that while RBS's insurance operations were barely profitable, making just £13m against £142m the previous quarter, this was because of "one-off hits", particularly "lawyers inciting people involved in car accidents to make big claims". He said this would not affect the prospects for a successful sell-off, which is required by the EU.
Mr Hester admitted that the disposal programme – which also includes more than 300 branches intended to go towards the formation of a new bank – was "not what we wanted".
Global Banking & Markets, the investment banking operation, also saw a sharp decline in profitability, making £647m against £1.1bn in the previous quarter, which Mr Hester described as unusually good. This is the division most likely to be affected by staff departures as a result of the ban on the bank paying cash bonuses to anyone earning more than £39,000.
Responding to questions suggesting that the enormous weight of information supplied by RBS – its statement reached 120 pages – was being used to obscure useful information, a favoured tactic of Yes Minister's Sir Humphrey Appleby, Mr Hester said: "It's not my job to make anyone else's easy. Disclosure is generally seen as a good thing."
The Financial Services Authority has recently voiced concerns about the increasing length of banks' financial reports being used for this purpose.Reuse content