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RBS takes a £2bn hit but defends ABN deal
Nick Goodway, Evening Standard28 Feb 2008
Royal Bank of Scotland chief executive Sir Fred Goodwin today came out fighting against critics who claimed Britain's second-biggest bank had gone a step too far with its joint takeover of Dutch bank ABN Amro last year.
"It is tempting to think of the task before us only in terms of the integration of ABN Amro and delivery of substantial cost and revenue synergies," he declared. "To do so, however, would overlook the real opportunities for the enlarged group."
RBS pre-tax profits were bang on City forecasts - up 9% at £10.3 billion. That puts the eight London-listed banks safely on target for profits totalling a record £41 billion in 2007 once HSBC reports its numbers next week. In 2006, when there were nine banks before Northern Rock's nationalisation, they made profits of £40 billion.
However, Goodwin today raised the amount the bank had to write down because of the subprime crisis and following credit crunch to £2.14 billion. He had said in December that he expected writedowns of £1.25 billion. Today's number includes £978 million of mark-downs at ABN Amro and £1.16 billion from RBS's own books.
Goodwin admitted that there could be further writedowns to come, with investors' eyes firmly fixed on its exposure to the US monoline insurers, which guarantee municipal and banking bonds and have all needed bailouts. He also said RBS had not been in contact with sovereign wealth funds about any injections of new capital as had been rumoured, but suggested the bank could look at selling off some assets in 2008 "if the prices are right".
RBS boosted its attraction to investors by raising its total dividend by 10% to 33.2p, paid out of earnings per share up 18% at 78.7p.
Goodwin said: "While the future seems as difficult as ever to predict, it is clear that we enter 2008 with real momentum behind our organic growth and with our product range, distribution capabilities and customer franchises materially enhanced. Coupled with our greater presence in the world's largest and fastest-growing economies, there is much to be done, but a confidence that it will be."
Profits at RBS' UK High Street business, which includes NatWest, soared 10% to £2.47 billion, with strong sales growth in savings and investments.
Goodwin said he was particularly pleased at the way the business had strengthened during the second half of the year when, despite growing signs of a downturn in consumer confidence, the bank's losses from bad unsecured loans fell yet again. However, US retail business Citizens put in a very different performance, with losses on bad loans increasing as the subprime effect hit.
Operating profits there fell by 9% to $2.65 billion, which translated into an even worse performance in sterling terms due to the dollar's weakness.
Shares in the bank, which have fallen more than 40% in the past year, today gained 8p to 418p.
Reader views (1)
The RBS results are impressive but I'm afraid that our own story ( a case of mismanagement and financial errors committed upon our account by RBS and which has lasted now for 14 years without resolve) reflects a disgraceful different angle upon the way that RBS deals with their customers.
Whilst RBS have said "sorry" to us in writing, including so in a letter from Sir Fred Goodwin,that's about it and we have received not one penny by way of compensation for our losses as a result of what RBS did. They consistently refuse over the years to meet with us and never settle this highly disturbing case.
Is it not disgraceful that in today's Britain, we are forced to fight our case against RBS for 14 year without resolve?
- Bernard Lockett, Folkestone, Kent, 28/02/2008 15:34
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