RBS posts £691m loss on writedowns of £5.9bn

by Gill Montia

Story link: RBS posts £691m loss on writedowns of £5.9bn

Royal Bank of Scotland (RBS) has taken its place in the record books with the second-biggest loss in UK banking history.

The group posted a first-half pre-tax loss of £691 million, having written down £5.9 billion in the first six months of the year.

The writedowns included losses on mortgages and assets hit by the credit crisis, some of which related to the group’s acquisition of Dutch bank, ABN Amro, last year.

The result compares with a profit of £5.1 billion in the first half of 2007 and ends a forty year history of remaining in the black.

The timing of the ABN acquisition has been central to RBS’s performance during the credit crisis.

Last November, a consortium led by RBS bought ABN for around £57 billion in what was the largest, and some would say most overpriced, takeover in banking history.

RBS’s chairman, Tom McKillop, has since admitted that relative to bank valuations today the price was high.

The takeover also increased the group’s exposure to wholesale markets at a time when the credit crisis was about to bite.

The scale of today’s writedowns will not surprise analysts as the bank alerted the markets when it launched its £12 billion rights issue, earlier this year.