RBS announces £40bn loss

Royal Bank of Scotland has today posted the biggest annual loss in UK corporate history. The bank, which was bailed out by the government last year, reported a pre-tax loss of £40.7bn for 2008. It's had to place £240bn of assets in the government insurance scheme that will offer insurance against any further losses.

Chairman, Philip Hampton, said: "The external environment has seen unprecedented turbulence in bank and other financial markets and deteriorating economic conditions around the world. Our disappointing financial results reflect these circumstances and our exposure to them."

RBS has called off a year long sale of its insurance division. However, it has now pledged to keep the iinsurance business, which saw profits leap 15% to £780m.
CEO Stephen Hester said: “We plan to retain each of our major business divisions since we believe, with intensive restructuring, they can meet the attractive business characteristics outlined as targets above.

“At all times we will responsibly compare the value to RBS of each of our businesses with realistic alternatives and take different action if they prove compelling. However, the distressed and pessimistic state of markets for financial assets and businesses offers little immediate encouragement in that regard.”

RBS has received much criticism as it revealed that Sir Fred Goodwin, the former chief executive of the bank, was receiving a £650,000 a year pension.

The Group is announcing a sweeping restructuring plan:

• Shift 20% (£240bn) of funded assets to Non-core Division for disposal/run down over 3-5 years
• Centre on UK with smaller, more focused global operations
• Radically restructure GBM, taking out 45% of capital employed
• Cut more than £2.5 billion out of the Group's cost base
• Have access to the Government Asset Protection Scheme
• Drive major changes to management, processes and culture

Highlights:

• Total income £26.9bn
• Operating profit of £80m
• Attributable loss £24.1bn
• Loss before tax £40.7bn
• Loss attributable to ordinary shareholders £7.9bn
• Impairment losses £7.0bn
• Credit market losses £7.8bn
• Write down of goodwill and other intangible £16.2bn
• Loss per ordinary share 61.0p)
• RBSI profits up 15% to £780m
• Net insurance claims fell by 13% to £3,917m.
• General insurance claims fell by 7%, reflecting improved risk selection, better claims management and the non-recurrence of the severe floods experienced in 2007.
• Bancassurance claims declined by 64% as a result of movements in financial market values.