Page last updated at 12:28 GMT, Friday, 8 May 2009 13:28 UK

RBS warns of 'tough' times ahead

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RBS said further job cuts could be expected "on a continuing basis"

Royal Bank of Scotland (RBS) has said it is preparing for two "very tough" years, after announcing a loss for the first three months of 2009.

The bank reported a pre-tax loss of £44m, compared with a profit of £479m for the same period a year earlier.

Despite a good performance from its investment banking division, it was hit by losses of about £5bn on loans and investments that have gone bad.

RBS, which is 70%-owned by taxpayers, also warned of more job cuts to come.

"Some commentators are beginning to talk about economic recovery," said chief executive Stephen Hester.

"We remain cautious and continue to plan and manage our businesses in the full expectation that both 2009 and 2010 will be very tough years for RBS."

He added that the bank was particularly wary of its credit exposures.

"Green shoots as relates to credit are not there," he told journalists.

However, he added he was confident RBS that had a strong franchise from which it could rebuild shareholder value.

RBS shares were up 14% at 47.5p in early afternoon trading.

Further job cuts

The bank increased its customer base over the year, with the number of UK current accounts rising by 3% to 12.5 million, and the number of savings accounts up 15% to 9.2 million.

RBS said it had made "good progress" on its strategic plan to get back to "stand-alone strength".

Royal Bank of Scotland's results for the first three months of the year are a Jekyll-and-Hyde tale of very good and appallingly bad
Robert Peston, BBC business editor

In April, it said it was going to cut 9,000 jobs worldwide, on top of the 2,700 job losses already announced in the UK this year.

And Mr Hester said that further cuts could be expected "on a continuing basis".

In 2008, RBS made the largest annual loss in UK corporate history.

Its loss of £24.1bn mostly stemmed from a £16.2bn write-down of assets, including ABN Amro, which it bought in 2007.

Mixed bag

The quarterly results were the first time RBS had released figures for a three-month period.

The bank said it had provided investors with more transparency than ever before.

Losses after tax and minority interests amounted to £857m, including a loss of £359m relating to the sale of RBS's stake in Bank of China in January.

But total income increased by 26% to a record £9.7bn, compared with £7.7bn in the first three months of 2008, largely thanks to its investment banking division.

BBC business editor Robert Peston called the results a Jekyll-and-Hyde tale of very good and appallingly bad.

He said that the billions in extra revenue had been wiped out by losses on loans and investments that had gone bad.

RBS saw losses on bad loans almost quadruple to £2.9bn for the quarter, while it wrote down £2.1bn in credit market losses.

"With a new board of directors now in place, management is acting rapidly in order to pull as many skeletons from the cupboard as possible," said Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers.

"Nearly £5bn of bad debts is being laid at the feet of former management, whilst expectations of the mammoth task ahead are being underlined."

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The Scotsman Rosemary Gallagher: Quarterly highlights can't hide magnitude of task facing Hester - 10 hrs ago
Yorkshire Post Bad debts burden weighs on RBS - 20 hrs ago
Open Democracy RBS back to normal, - 25 hrs ago
TradingMarketsRBS swings into red; posts 44 mn pounds Q1 loss - 27 hrs ago
Bobsguide RBS tumbled to Q1 loss as bad loans rise - 29 hrs ago
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