Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS), which is under investigation for its role in manipulation of LIBOR (London interbank offered rate), reported today a net loss of £1.99 billion, or $3.09 billion for the first half of the year.
Royal Bank of Scotland’s Group plc (NYSE:RBS) posted £1.99 billion net loss for the six months ending in June, against £1.42 billion loss over the same period last year. Revenues for the same period fell 8 percent, to £13.29 billion. The Edinburgh based bank, of which 82 percent stake is owned by the British government after providing a bailout during the crisis, suffered mainly due to amounts set aside to compensate customers for a recent technology problem, and also for inappropriate selling of insurance to clients. The Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) took £2.97 billion accounting charges on its own debt. However for the quarter ending June, its net loss was reduced to £466 million, compared with £897 million for the same period last year.
The British bank investment banking division reported a 29.6 percent drop in its operating profit, to £264 million, for the first six months of the year. As a result the bank announced a workforce cut by 5,700 jobs over the period, mainly from markets and international banking division, which was an increase from its earlier plans of slashing 3,500 jobs over the next three years, in response to volatility in global financial markets. Like other corporates, Brit bank also suffered from weak consumer spending due to European debt crisis, which slowed its retail and corporate banking units. Just a few days back, Switzerland’s UBS AG (NYSE:UBS), and Germany’s Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) also reported lower profits for the almost the similar reason of euro zone debt crisis.
To stay on track, the bank has been reducing its assets, and plans to reduce its noncore assets by £22 billion, to £72 billion, which in 2008 stood around £258 billion. An encouraging sign was that its core Tier 1 ratio, which signifies banks’ ability to weather financial shocks, rose slightly to 11.1 percent.
Over its involvement in the LIBOR scandal, bank has dismissed a number of individuals and many of its employees has been named as defendants in lawsuits.“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.”
On the same day of the results, there are news that Senior British government officials are considering a possibility of buying the remaining 18 percent stake from private investors. In short they are planning for nationalization of RBS that could cost around 5 billion pounds ($7.79 billion). However the finance minister, George Osborne, is opposing such move as it won’t be fair to taxpayers.