The Royal Bank of Scotland has reported a £40bn loss before tax – the biggest in UK corporate history. Net losses, which come after tax and interest and other charges, came in at £24.1bn.
The pre-tax loss in 2008 compares with a £9.8bn pre-tax profit in 2007 and comes after £32.6bn writedown of assets, mostly related to its ill-fated decision to buy ABN Amro for €71bn (£63bn).
Some £16bn of the losses relate to ABN assets bought by Belgian bank Fortis that RBS consolidates in its accounts under the terms of the 2007 acquisition of the Dutch bank by the RBS, Fortis and Spain’s Santander. Stripping those out, RBS made a £24.1bn loss.
– Tax payers to insure £300 billion of Royal Bank of Scotland ‘toxic’ bad debt (Telegraph)
– RBS record losses raise prospect of 95% state ownership (Guardian)
– The worst business loss in UK history (Independent)
The previous record annual loss for a UK company was £14.9bn.
The bank, already 70pc owned by the state, unveiled a sweeping restructuring plan.
This included placing £325bn in assets in a state insurance scheme. Under the scheme designed to extent another lifeline to banks, RBS will be responsible for the first £19.5bn of losses – or 6pc of the asset value.
The taxpayer will bear 90pc of any losses after that, and RBS incur the remaining 10pc.
RBS will also shift £240bn of non-core assets to a standalone division. These will be sold or run down over five years.
As many as 20,000 jobs could be lost after RBS said it planned to cut costs by £2.5bn.
RBS share rose 30pc to 30.5p as details of its participation in the asset scheme were revealed. The bank was the biggest riser on the FTSE 100 index, which increased 2.4pc to 3942 points in early trading.
News of the bank’s huge loss follow the BBC’s revelation about the scale of former chief executive Sir Fred Goodwin’s pension fund, said to be worth £16m. His decision to buy ABN Amro has been widely blamed for making RBS more vulnerable.
The BBC has learned Sir Fred has begun drawing his £650,000-a-year pension.
Treasury Minister Stephen Timms said the government was looking at ways of “clawing back” his payments.
RBS’s expected 2008 annual loss compares with its £9.9bn profit in 2007 and £9.2bn profit in 2006.
Last Updated: 12:02PM GMT 26 Feb 2009
Source: The Telegraph