DealBook: Royal Bank of Scotland Records $3 Billion Loss in First Half

Simon Dawson/Bloomberg NewsThe Royal Bank of Scotland offices in London.

LONDON — Royal Bank of Scotland on Friday reported a net loss of £1.99 billion, or $3.09 billion, in the first half of the year after it took an accounting charge on its debt and other one-off charges.

The bank, which is based in Edinburgh and 82 percent owned by the British government after receiving a bailout, set aside £125 million to compensate customers for a recent technology problem and a further £135 million for the inappropriate selling of insurance to clients.

Royal Bank of Scotland said regulators continued to investigate its role in the manipulation of the London interbank offered rate, or Libor.

The firm has dismissed a number of individuals in relation to the inquiries, while several of its employees have been named as defendants in lawsuits connected to the rate-rigging scandal, according to a company statement.

The bank, which did not name the individuals implicated in the lawsuits, said it could not estimate the amount of future potential fines or when any announcement connected to the Libor investigations would be made.

“We are in a chastening period for the banking industry,” Royal Bank of Scotland’s chief executive, Stephen Hester, said in a statement. “The Libor situation is on our agenda and is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact.”

Royal Bank of Scotland’s £1.99 billion net loss in the six months through June 30 came after it recorded a £2.97 billion accounting charge on its own debt. The first-half figures compared with a £1.42 billion loss over the same period last year. Revenue fell 8 percent, to £13.29 billion.

During the three months through June 30, the British bank’s net losses narrowed to £466 million, compared with £897 million in the second quarter of last year.

The firm’s operations continue to suffer from weak consumer spending as the fallout from the European debt crisis affected the retail and corporate banking units.

Royal Bank of Scotland also has been paring back its investment banking division in response to the current economic climate. That unit reported a 29.6 percent drop its operating profit, to £264 million, in the first six months of the year.

The British bank said it had cut its work force by 5,700 over the period, primarily from its markets and international banking division. Earlier this year, the firm said it would eliminate 3,500 jobs in its investment banking unit over the next three years in response to volatility in global financial markets.

Royal Bank of Scotland has been slashing its assets to improve profitability, and it said it had cut its noncore assets by £22 billion, to £72 billion, during the first half of the year. That figure stood at £258 billion in 2008.

The firm’s core Tier 1 ratio, a measure of a bank’s ability to weather financial shocks, rose slightly to 11.1 percent.

Shares in the bank rose 4.3 percent in morning trading in London.

Article source: http://dealbook.nytimes.com/2012/08/03/royal-bank-of-scotland-records-3-billion-loss-in-first-half/?partner=rss&emc=rss