RBS loses a packet

You may have heard on the BBC that RBS made £15 million. If only.

The loss for shareholders (yes, us the taxpayers) was £1 billion for the six months. There was a collosal £7.5 billion of write offs. The operating loss was £3.35 billion.

The bank has started to shrink its size dramatically. The balance sheet has been reduced by a quarter, from £2.2 trillion to £1.64 trillion , but is still bigger than the national income.

If you want to know why there isn’t enough credit in the UK economy you should start by looking at the government’s very own big bank and its policy. It has set out to cut its loan to deposit ratio to 100% from 150%. That will mean reining in its lending. It is also planning to more than halve its reliance on wholesale funds, again pointing to less lending.

Meanwhile according to news reports the staff costs are up 11%!

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15 Comments

  1. Kevin Lohse
    Posted August 7, 2009 at 9:27 am | Permalink

    Only a NuLab Government Minister, backed up by the BBC, could find anything to brag about in these figures. Could it be said, John, that the RBS is technically insolvent and should not Accounting Procedures be amended to prevent such a gross misrepresentation of fact? Would not a private owner be publically held to account for representing a £3.35 Billion operating loss in such a cavalier fashion?

    • StevenL
      Posted August 8, 2009 at 12:34 am | Permalink

      When they were privately owned, these banks were claiming that all the dodgy consumer, and ultra-risky corporate debt was worth a hell of a lot more that it turned out to be. Not only that, they ‘banked’ the annual profits and bought Ferrari’s and yachts with the proceeds before extending the begging bowl to the taxpayer. I think you will find it is all well within the plc accounting rules and signed off by the auditors.

  2. oldtimer
    Posted August 7, 2009 at 10:17 am | Permalink

    The BBC spin machine has, again, managed to get its knickers in a twist over RBS with its statement that RBS made a profit. I looked up the RBS statement for myself and there, clear as you could wish for, was a letter from Mr Hester saying that the bank had lost £1bn. Does the BBC no longer employ people who can read? On this evidence they are not fit for the responsibility they have as a public service broadcaster.

  3. oldrightie
    Posted August 7, 2009 at 10:23 am | Permalink

    I’m definitely not a financial wizard but I just managed to grasp Peston’s take on QE and RBS. An excellent piece and descriptive of the underlying failure, yet again, of Brown to get anything right.
    A further fact, ignored by Government, is the debt hangover of private individuals and companies. Even if more lending was available they cannot service more debt. We are in a vicious circle that will need draconian action to break. That will be an inevitable loss of millions of public sector sinecures to match that already hurting the Private Sector.
    I have to go and shovel horse manure now. Honestly, I shall be thinking of Labour the whole time!

    • Waramess
      Posted August 8, 2009 at 9:52 am | Permalink

      Could this possibly be a quote from GB

      ” People always ask, “What is your greatest failure?” I always have the same answer—We’re working on it right now, it’s gonna be awesome!”

  4. APL
    Posted August 7, 2009 at 11:50 am | Permalink

    Oldrightie: “We are in a vicious circle that will need draconian action to break. ”

    The draconian action is the action required is everything the government has tried to avoid.

    Northern Rock – insolvent – should have been closed down.
    B&B – insolvent – should have been closed down.
    Halifax BOS – insolvent – should have been closed down.
    This one has at Gordon Browns instigation infected a reasonably good bank – Lloyds
    RBS – lost a billion this time round – is probably insolvent and should be closed down.

    The government has done everything it could to avoid doing the right thing. But in doing so has practically bankrupted the UK pubilc finances.

    JR: “If you want to know why there isn’t enough credit in the UK economy you should start by looking at the government’s very own big bank and its policy.”

    It is even debatable that there isn’t enough credit avaliable. The economy is probably going to contract some more, we very likely won’t need a financial sector the size we have built for a bubble fincial economy.

  5. Jon
    Posted August 7, 2009 at 11:55 am | Permalink

    Brown’s first state visit was to China and he gave them 825,000,000 of our money which was probably borrowed and we are paying interest on.

    I look at that £2.2 to £1.64 trillion, out total GDP is around £1.4 trillion. Scary.

  6. Jon
    Posted August 7, 2009 at 11:59 am | Permalink

    I assume the staff cost rise is redundancy costs.

  7. alan jutson
    Posted August 7, 2009 at 1:09 pm | Permalink

    Interesting what spin you can put on a Company performance with such tragic losses, and as yet unknown, unquantified further debt.

    If this Bank was not being funded/underwritten by the taxpayer, then it would surely be trading illegally.

    Interesting information reported on ITV news this lunchtime.

    The EU has informed RBS that it should curtail lending to smaller businesses, under an EU directive.

    It was suggested in the report that the EU has some power over all Member States Banks, and how they operate.

    John is this true ?

    If so, surely another reason for our exit.

    Reply: they have competition law powers.

  8. Mike Stallard
    Posted August 7, 2009 at 3:47 pm | Permalink

    Simple soul that I am, I believed the BBC when it said, this morning to be exact, that the RBS had pulled itself together and had made a modest profit of £15 million, which showed that it was now turning round. I immediately thought: “Well, at least the government has done something right.”
    You now prove not only that this is wrong, but also that it is a lie; they must have known the truth.
    In the Telegraph there are two examples, also, of senior BBC officials in a scam.
    Versicle: “Governments deal in billions.”
    Response: “And banks deal in trillions.”
    So if this decline of the RBS continues, we are up for the same amount as President Obama intends to spend on his US nationwide health program.
    Argentina without the steaks; Iceland without the thermal baths…..

    • StevenL
      Posted August 8, 2009 at 12:46 am | Permalink

      I turned on Sky News at 7:45 am, half asleep, and thought I read £15 billion on the ticker! Then I snoozed for another 10 minutes (thinking I’d wake up to a tidy profit on a small spread bet I’ve had going) and turned on my laptop, logged onto the Daily Telegraph, and read about losses of £1 billion.

      I’ve tried my best to keep track off the ‘credit crunch’, ‘financial crisis’, ‘recession’, ‘bailouts’ etc from when it started but to be honest I’ve lost track, it all moves faster than my brain does.

      My opinion is that the banksters are now living is some sort of virtual accounting reality, but maybe I’m just being cynical.

  9. Brian Tomkinson
    Posted August 7, 2009 at 6:59 pm | Permalink

    Why is no one from the Conservative front bench on the media castigating the government for this and the additional £25,000,000,000 of printed money? They can’t all be on holiday can they? It’s just not good enough to complain about the excessive shutdown of Parliament and then stay silent whilst the country is taken closer to total ruin. Their silence speaks volumes.

    • StevenL
      Posted August 8, 2009 at 1:00 am | Permalink

      They don’t want to look wrong/be accused of talking the economy down/their marketing men are telling them not to? Beats me!

      However, I’m not sure about ‘total ruin’, I think decisions are being made that are more in the short term interests of the election rather than the long term interest of the country, but I’m not sure about ‘total ruin’.

  10. TomTom
    Posted August 8, 2009 at 12:30 am | Permalink

    Banks have always been a confidence trick against the public underwritten by the government.

    We never expected the proof to be so blatant

  11. revinkevin
    Posted August 8, 2009 at 2:06 pm | Permalink

    This bank should be renamed to the Failed Bank of Scotland.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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