Boss says sorry as Royal Bank of Scotland slumps to £700m loss

The boss of one of Britain's biggest banks apologised yesterday for a catastrophic loss caused by a near £6billion write-off of bad debts.

Sir Fred Goodwin said he 'regretted' the dismal losses of nearly £700million at Royal Bank of Scotland  -  the second worst by a British bank.

It is a dramatic climbdown for a man more used to boasting about the bank's profits, than saying sorry for its losses.

He said: 'It has been a chastening experience and reporting a pre-tax loss of £691million is something I and my colleagues regret very much.'

The scale and the speed of the collapse at RBS, which owns NatWest and the Queen's bankers Coutts, is staggering.

Royal Bank of Scotland's loss is the second biggest by a high street bank, beaten only by Lloyds in 1989, which made a loss of £715million.

But this loss, which related to bad debts at Lloyds' Latin American operations, was for a whole year, whereas RBS's shortfall was racked up in just six months.

The slide into the red is all the more startling when compared with the bank's performance for the same period just last year.

Between January and June 2007, it made a profit before tax of £5.1billion.

The massive loss, equal to £3.7million a day, caps a disastrous fortnight for the British banking industry which has been struggling under the effects of the credit crunch.

Both Lloyds TSB and HBOS, the owner of Halifax, revealed 70 per cent plunges in profit, and Alliance & Leicester's plummeted by 99 per cent.

Royal Bank of Scotland's losses were blamed yesterday on £5.9billion worth of credit crunch write-downs  -  or adjustments in the value of its assets to reflect current market prices  -  stemming from poor investment decisions.

For shareholders, the experience has been equally miserable with the values collapsing over the last year.

Shares in RBS have halved over the last 12 months.

The bank recently raised a staggering £12billion from its shareholders in the biggest- ever rights issue in European history.

Its decision to buy Dutch investment bank ABN Amro, just months before the credit crunch struck, may prove to be another costly mistake.

Slump: Royal Bank of Scotland has posted the biggest ever loss in British banking history

Sir Fred  -  nicknamed 'Fred the Shred' for his aggressive cost-cutting while in a previous post  -  said the first half of the year had been 'as difficult an operating environment as we have encountered for some time'.

But he hinted there could be worse to come, adding: 'The difficult conditions in the financial markets look set to be compounded by a deteriorating economic outlook.'

For example, he said that many of RBS's small business clients, who are collectively one of the country's biggest employers, are struggling under what the bank describes as 'increased strains'.

Like its rivals, it expects more customers to fall into difficulties, increasing its 'impairment charge'  -  the amount written off in unpaid debt  -  nearly three-fold to £1.5billion.

Yesterday, experts said they are hoping that the last fortnight of big banking losses and write-downs will signal the worst is over for the beleaguered industry.

Richard Hunter, head of UK equities at broker Hargreaves Lansdown, said: 'Given the size of some of the writeoffs we have seen, we would have to say hopefully we are over the worst.

'That hasn't necessarily been reflected in the share prices because we have been here before,' he added.

'It will take quite a few months for it to be proven beyond doubt that there are no more to come.'

Yesterday, RBS's shares closed up 3.2 per cent at £2.401/2, but they are still far below their 12-month high of just over £5.