Royal Bank of Scotland Group Plc (RBS,RBS.L), the U.K.'s largest government-controlled bank, reported Friday a net loss for the third quarter, compared to a profit in the same period last year. The results reflected hefty impairments and credit market write-downs, amid the difficult economic environment.
For the third quarter, the company's loss before taxation from continuing operations was GBP 2.17 billion compared with a profit of GBP 2.20 billion in the prior-year quarter.
Loss for the period attributable to shareholders was GBP 1.80 billion versus a profit of GBP 871 million last year. Loss from continuing operations was GBP 1.57 billion compared with a profit of GBP 1.41 billion last year.
Edinburgh-based RBS has been one of the hardest hit European banks in the prevailing financial crisis, due to its increased exposure to sub-prime loans and its expensive buyout of ABN Amro Holding NV in March 2007, three months before the credit crisis began. Late last year, the British Government took control of RBS with 70% stake in the bank, saving it from going haywire. The U.K. government pumped in GBP 20 billion or US$32.8 billion of rescue funds.
In late 2007, RFS Holdings B.V., a company jointly owned by RBS, Fortis Bank Nederland (Holding) N.V. and Banco Santander S.A., completed the acquisition of ABN Amro. Proforma results include only those business units of ABN Amro that will be retained by RBS.
On a proforma basis, loss before taxation from continuing operations was GBP 2.08 billion compared with a profit of GBP 1.90 billion in the corresponding period last year year. RBS reported an attributable loss of GBP 1.80 billion versus a profit of GBP 871 million in the third quarter of fiscal 2008. Pro forma loss from continuing operations for the quarter was GBP 1.50 billion as against a profit of GBP 1.18 billion in the year ago quarter.
For the three-month period, net interest income decreased to GBP 3.86 billion from GBP 4.79 billion in the third quarter of fiscal 2008. The company's non-interest income was GBP 4.22 billion versus GBP 5.17 billion in the 2008-year period.
Group net interest margin in the quarter was 1.75%, better than the company's own forecasts. This compares to 1.70% in the second quarter and 2.05% in the third quarter of 2008.
Total impairment losses incurred by RBS during the quarter were substantially higher at GBP 3.49 billion compared to GBP 1.40 billion in the same quarter last year. Impairments and credit market write-downs remain concentrated in non-core division, though Ulster bank particularly and Citizens are still experiencing increased impairment losses, reflecting the difficult economic environments they operate in, the company said.
Impairment losses from Ulster bank rose to GBP 144 million from GBP 17 million, and impairment losses incurred by non-core division was GBP 2.07 billion versus GBP 768 million a year ago.
RBS reported an operating loss of GBP 1.53 billion for the third quarter, compared with an operating profit of GBP 2.31 billion in the year-ago period. For the third quarter of 2009, operating profit before impairment losses dropped to GBP 1.75 billion from GBP 3.59 billion last year.
Compared to the prior quarter, however, RBS's pre-impairment operating profit improved to GBP 2.24 billion from GBP 2.09 million after adjusting for movements in fair value of own debt.
In August, RBS reported a sharply narrower loss for the second quarter of fiscal 2009, helped mainly by the improved performance of its investment banking business. Pro forma loss before taxation had narrowed to GBP 252 million from a loss of GBP 1.21 billion a year ago. Proforma loss attributable to shareholders was GBP 140 million compared with a loss of GBP 1.05 billion last year. RBS's second quarter pro forma net interest income had declined to GBP 3.12 billion from GBP 4.04 billion in the comparable period a year ago.
For the nine-month period, the company's loss before taxation from continuing operations was GBP 2.41 billion compared to a profit of GBP 1.47 billion a year ago. Loss attributable to shareholders was GBP 2.84 billion versus a profit of GBP 44 million in the previous-year period. During the period, RBS incurred a loss of GBP 1.38 billion as compared with a profit of GBP 1.02 billion in the 2008-year period.
Year-to-date net interest income slipped to GBP 12.24 billion from GBP 13.49 billion last year. Non-interest income for period surged to GBP 17.68 billion from GBP 10.32 billion in the corresponding period prior year.
On a pro forma basis, loss before taxation from continuing operations was GBP 2.37 billion versus a profit of GBP 1.18 billion in fiscal 2008. RBS's attributable loss for the year-to-date period was reported as GBP 2.84 billion versus a profit of GBP 44 million in the 2008-year period. The company posted a loss of GBP 1.39 billion from continuing operations as compared with a profit of GBP 756 million in the same period last year.
At September 30, 2009, Royal Bank had total assets of GBP 1.68 trillion, up GBP 35.9 billion or 2% compared to June 30, 2009, primarily due to exchange rate movements following the weakening of sterling since June.
Loans and advances to banks in the period were up 16% to GBP 97.5 billion, reflecting higher reverse repurchase agreements. Loans and advances to customers slipped 1% to GBP 631.5 billion. Deposits by banks declined by GBP 1.3 billion or 1% to GBP 178.4 billion.
Group chief executive Stephen Hester said, "Economic recovery is likely to be slow and the pain of economic adjustment will take years to subside. Our business will reflect these issues." Hester also said that regulatory pressures on all banks will continue to increase the cost of doing business and require higher margins and more capital than previously.
Looking ahead, Hester said RBS remains cautious about economic prospects as the recovery seems likely to be slow and unemployment continues to rise. "Net interest margin is stabilising, but we expect competition for retail deposits to remain intense and overall NIM is expected to remain broadly stable in the next few quarters. Impairments appear to be plateauing in line with first half levels, although there may be volatility around that trend in coming quarters," he concluded.
Among others in the industry, Citigroup Inc. (C) on October 15 reported a net profit for the third quarter compared to a loss last year. However, net loss attributable to shareholders widened from last year due to previously announced exchange offers. The company reported a third-quarter net profit of US$101 million compared to a loss of US$2.82 billion in the year ago-quarter. Attributable net loss widened to US$3.24 billion from US$2.93 billion last year. On a per share basis, loss narrowed to US$0.27 from US$0.61 in the previous year. Revenues for the third quarter rose to US$20.39 billion from US$16.258 billion in the prior year quarter.
In Thursday's regular trading session, RBS closed trading at US$11.88 per share on the New York Stock Exchange. In the past 52-week period, the shares have been trading in a range of US$2.86 to US$21.40.
In Friday's regular trading session, RBS is currently trading on the London Stock Exchange at 37.80 pence per share up 2.59 pence or 7.36% on a volume of 64.41 million shares. In the past 52-week period, the shares have been trading in a range of 10.00 pence to 71.20 pence.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.