Royal Bank of Scotland (RBS) has reported losses of £1bn net for the first six months of 2009, disappointing a market that was expecting the bank to show a small profit.
RBS Investment bank profits failed to wipe out the bad debts of the state owned lender, leaving the bank to suggest that there will be more of the same before the UK economy shows signs of growth.
Chief Executive Stephen Hester warned;
“There will be no miracle cure. There will be a couple of years of heavy lifting ahead, both for RBS and for the world economy.This will be a marathon, not a sprint.”
The RBS figures are a reality check after the optimism shown from other UK bank reports. Earlier in the week Lloyd’s had suggested that the worst was over for it’s bad loans with hints that recovery was just around the corner.
In contrast Stephen Hester has suggested results from RBS could be poor for two more years with no substantial improvement until 2011. The RBS CEO expects investment banking income to fall over the coming months from the current ‘abnormal levels’, while commercial and retail banking continues to show signs of lower revenues and margins, but more bad debt.
Lending to small businesses is part of the banks agreement to being bailed out by the government, but RBS have seen a decline in the six months, with less business loan applications and the bank has warned it may be difficult to meet government targets.
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