Impairments have peaked, says RBS

25th Feb 2010 06:59

Part-nationalised bank Royal Bank of Scotland saw its net attributable loss narrow markedly in 2009 with fourth quarter impairments 5% lower than the third quarter.Net attributable loss in 2009 was £3.6bn, down from £24.3bn in 2008. The market consensus had been for a loss of £3.85bn, though forecasts varied wildly.Impairments surged to £13.9bn from £7.4bn in 2008, but risk elements in lending at year end were unchanged compared with end-September at £35.0bn. Impairment losses in the fourth quarter totalled £3.40bn, compared to £3.49bn in the third quarter of 2009.Pre-impairment profit, adjusted for fair value of own debt, improved to £7.8bn from a loss of £0.7bn in 2008.Core bank operating profit improved to £8.3bn from £4.4bn billion in 2008, with a strong performance from Global Banking and Markets (GBM).‘An £8.3bn profit for 2009 in our Core businesses provides evidence that the new RBS can deliver sustainable earnings. RBS is also becoming safer and smaller more quickly than we expected,’ said group chief executive Stephen Hester. Risk in the balance sheet has been reduced, with total assets cut by £696bn during the year to £1,522.5bn. The bank’s targeted £500bn reduction in its funded balance sheet in constant currency terms is now 70% complete, while the group is ‘ahead of its targets on every published measure for this first year of the five-year plan.’The Core Tier 1 capital ratio improved to 11.0% from 5.9% at the end of 2008, following the issue of B shares to the UK Government and accession to the Asset Protection Scheme. Risk-weighted assets at year-end were £438 billion.Total income advanced to £31.723bn from £23.63bn.Hester said that the board does not expect to claim losses under the government’s Asset Protection Scheme ‘but it does provide valuable protection in the event of more challenging economic conditions.’On the subject of bonuses, Hester’s stance is that it is unfair to penalise the workforce for the mistakes of people ‘no longer with the group’. The board’s policy was ‘to pay the minimum necessary to retain and motivate staff who are critical to the recovery of RBS.’