Borrowing heavily to acquire international businesses such as the Dutch giant ABN AMRO, The Royal Bank of Scotland who also owns and the National Westminster Bank and a string of other businesses worldwide has suffered more than most as we move through the Credit Crunch.
Coming on top of write-offs totally £5.9 billion in the first half the £206 million write down may provide some relief to investors many of which expected worse. Stephen Hester speaking to the BBC this morning said:
"The scale of the market disruption and the economic downturn that is happening as a consequence means that credit losses are rising very sharply and other losses associated with market disruption and that meant that in the first half of this year we made a loss after taking account of those other items and we are signaling a similar scale of write offs in the second half."Stephen Hester refused to be drawn on whether the Royal Bank would make a loss at the year end, but acknowledged that Investment Analysts were likely to be forecasting full-year losses. Hester, himself a former Investment banker said: "In a market that is so uncertain as current we can't make a forecast for the end of the year." Hester indicated, however, that there were likely to be significant write-offs ahead and that the impact of that would result in speculation about the annual results profits and said: "I expect that people may conclude that the profits will be difficult to achieve this year."
Acknowledging that RBS over-borrowed to buy ABN AMRO at top of the bull run Hester emphasised the Group needs to slash debt. Trading at a fraction of the 2007 high of 700p Royal Bank of Scotland shares fell 7% to 60p per share this morning, but later rallied to end the day steady at 65p capitalising the group at just £10.5bn, or just one times last years operating profit.
RBS Chief Executive Stephen Hester speaking to the BBC this morning