RBS – did it make a profit?

Government Ministers and their faithful allies at the BBC report RBS as being in profit, making £15 million pre-tax.

It is true that in one of the many presentations of figures within the complex Interim Statement by RBS it does show a pre-tax profit of £15 million. That same presentation also shows that the group lost £3.35 billion at the operating level, made profits on disposals and debt redemption to get marginally into profit, but then after allowing for a write down of goodwill was in loss. The total loss attributable to shareholders was very clearly stated in several of the presentations as £1042 million.

As confirmation, the table which shows the rate of return on capital (now taxpayer owned and provided) shows a negative return, a massive – 18.1%. The consoldiated income is shown as minus £3billion, and the loss per share as 2.1pence.

That’s the wonder of spin. You include the items you like, and leave out the items you don’t like. It is only dangerous if you start to believe the selective figures.

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15 Comments

  1. WitteringsfromWitney
    Posted August 9, 2009 at 10:48 am | Permalink

    I believe this is an example of what is termed ‘presentation’, something that, in fairness, all the three main political parties are also guilty of.

    Lets face it, during the European elections not one – Con/Lab/LibDem wished to discuss the one subject that those elections were about, namely our membership of the European Union, either publicly or in their manifestos. As evidence of this David Cameron has, three times, refused to debate in a public arena, in his own constituency, that very question – and ‘Cameron Direct’ is, lets face it, no more than a ‘PR managed’ ‘presentation’ exercise.

    If political parties wish the public to be ‘informed’ then a balanced, and therefore unbiased, presentation of data must be followed, regardless of the subject of content and the organisation concerned.

    Don’t misunderstand me – I have a lot of time for you personally, but…….

    “That’s the wonder of spin. You include the items you like, and leave out the items you don’t like.”

    You said it!

  2. oldtimer
    Posted August 9, 2009 at 11:21 am | Permalink

    I watched the BBC Breakfast programme ( on BBC 1) on the morning of the RBS announcement. At just after 7am, the business correspondent said he had been telephoned by RBS and told they had made a loss of £1bn. It could not have been clearer.

    By c 7.45am someone in the BBC had obviously spotted the £15 million profit before writedowns and this was now splashed as the result – RBS was back in profit. Yet a city commentator in the studio said the result was worse than the city was expecting – much to the consternation and confusion of the BBC staff. His remarks, the specific guidance from RBS was ignored; it was not to get in the way of the story the BBC decided it wanted to tell. The markets, of course, knew otherwise.

    I think the BBC`s handling of this story is disgraceful.

    • alan jutson
      Posted August 9, 2009 at 8:50 pm | Permalink

      Yes I viewed exactly the same news story, and confirm your exact understanding of the broadcast.

      Amazing that during the day (after this first broadcast) almost all presenters were then talking up the performance of RBS with the £15 million pre tax profit being the headline, with the back up comment “RBS back in profit”.

      The most worrying of all was the so called financial experts, trotted out suggesting that it would not be long before RBS problems were behind them.

      Absolutely astounding. No mention of the Billions of yet unacountable debt to still be valued or written off.

      Think they call this creative accounting.

  3. Acorn
    Posted August 9, 2009 at 12:53 pm | Permalink

    Isn’t accountancy a wonderful art. A mentor of mine told me this some years ago. If you want to know how well a company is doing, follow the cash.

    On page 156 of the first half report for RBS, there is the “Condensed consolidated cash flow statement for the half year ended 30 June 2009 (unaudited)”. You will see that £28,178,000,000 has walked out the door of RBS in the last eighteen months.

    http://files.shareholder.com/downloads/RBS/698867414x0x311897/f0eda56a-909e-40fb-ba86-8b8d810df6a3/RBS_2009_Interim_Results_7_Aug_09_Company_Announcement_FULL.pdf

  4. Jon
    Posted August 9, 2009 at 1:09 pm | Permalink

    RBS is to be reduced so we won’t get a profit even ignoring the bad debt we tale on.

    What I do also see is a cashgrab of repossessions, dump bad debt onto the tax payer to help the government ownd banks balance books at taxpayers expense.

    RBS is mostly foreign loans and we can’t do much about that. The home market, especially the Rock could be managed a lot better. The banks progress the debt spiral practices that just load more debt onto the taxpayer. Its totally uneccessary.

  5. uk Fred
    Posted August 9, 2009 at 2:46 pm | Permalink

    There should be a responsibility on the company to ensure that the presentation of the figures is, if not “True and Fair” at least not misleading, and to issue a correction if the extracts from the accounts in the context in which they are published are misleading which the publications publishing such misleading information ought to have to publish in their next available edition with equal prominence. Perhaps we could insist that the person holding the press conference at which the misleading information is given sould have to hold another, with the same journlists invited to explain why they had published misleading information.

    With a government like Brown’s, is it any wonder that people think that all politicians are congenital liars. But on the bright side, they would be unable to do any departmental work because they would be spending all day ecery day explaining why they had issued misleading statements. So maybe, just maybe, they would have less time to damage the economy further

  6. Brian E.
    Posted August 9, 2009 at 3:38 pm | Permalink

    I always thought the auditors of a company had to ensure that the accounts gave a “true and fair view”. Presumably, nowadays, this doesn’t mean a true and fair view as seen by the average shareholder, but one that is true and fair to an experienced accountant who understands all the small detail!
    Personally, I believe that the auditors should have a lot to answer for in terms of the original failure of the banks in failing to check whether their assets (in the form of mortgages) bore some relationship to their debts (in terms of money borrowed). Yet strangely, the auditors appear to be the only people who haven’t been criticized in the whole debacle!

    • uk Fred
      Posted August 9, 2009 at 6:06 pm | Permalink

      The auditors have a duty to review the statutory published accounts and any summary information issued by the company. Their remit does not extend to what a journalist takes from these statutory accounts or what a politician or government press officer says about them.

  7. Mike Stallard
    Posted August 9, 2009 at 4:31 pm | Permalink

    I want to link this up with your post on the bank managers.
    If you speak in gobbledegook and also rely on falsified figures, people, including your dupes and the staff who work for you, are going to believe you.
    If, however, they see through the falsified figures, then they will cease to trust you in anything at all. I believe this is why New Labour are a busted flush.
    If, on the other hand, you face up to the truth, however unpleasant, then people will, maybe at first loathe you (just in time for the election?) but then they will come to respect you very much. Examples of this must be Winston Churchill, F D Roosevelt and Mrs Thatcher.
    Journalists, too, are subject to this law. The Daily Mail which, previously I dismissed as a lightweight paper, I now read regularly because it stood up to the blandishments of Tony Blair and his spinners. The Times didn’t. Newsnight didn’t.
    People like me don’t forget that; we don’t like being lied to.

  8. Emil
    Posted August 9, 2009 at 6:50 pm | Permalink

    So John, what is Mr Cameron going to do about a problem like the BBC once in power?

    They are now so institutionally biased towards Labour that they probably don’t even realise it any more.

    ps I saw Breakfast Time that morning and even after the interviewee said very clearly that these were disappointing results the Beeboid ignored everything he’d said and summed it up as being good news for taxpayers………

  9. Bazman
    Posted August 9, 2009 at 9:24 pm | Permalink

    I do love my billions. Stay tuned for the rematch when Viper increases horsepower against Hayabusa to 1000 bhp.

  10. Adrian Peirson
    Posted August 10, 2009 at 2:39 am | Permalink

    We live in a world where if a Politician says it then it is accepted to be true by around 10% – 20% of the population as being 100% correct.
    Thus even when given a debate, those arguing against have a massive hurdle to climb.

    Arguing in such a situation is like playing football on a pitch that slopes at a 45 deg angle towards your own goalmouth.

    It’s not helped by the fact that children are not taught about basic economic principles at school.

    Simple facts like, banks lend out 10 times more than they hold as reserves.
    Money is not actually backed by anything of value and is simply conjured up out of thin air in exchange for Gilts, which are similarly conjured up out of thin air whenever the Govt wishes to further impoverish and enslave us.
    That the Bank of England is a Private company.

    That words like Quantitive easing are designed specifically to play upon this induced Ignorance thus ensuring the Govt can do whatever it wishes and very few will know anything about it, still fewer will get to tell anyone else about it.

    Thank Heaven we still have the Internet.

    • Denis Cooper
      Posted August 11, 2009 at 7:38 am | Permalink

      No, the Bank of England is publicly owned and controlled.

  11. Andy
    Posted August 10, 2009 at 11:34 am | Permalink

    I am a staunch card-carrying capitalist, but what I’m hearing here is you’re blaming the government for allowing banks to do what they should have had enough brains not to do in the first place.

    It’s endemic to our system, and we have to learn to have an improved capitalistic system. Capitalism as it stands has basically failed us. Even worse–although many will disagree, I think capitalists have failed us as well as capitalism. They just cannot admit that they have brought this on themselves.

    This is basically an ethical issue. Call me old-fashioned, but there are some things you just don’t do. Now the ethical standard seems to be if everybody else is doing it, I can do it too. Carry that over into banking. Everybody else is doing these funny loans and having earnings grow faster, building up their margins, leveraging those margins.

    Call it what you will, but I don’t think what our government has done to the banks can be called nationalism.

    If the government owns 40% of the bank, it’s not their fault they own 40% of it. They had to bail the bank out.

    Frankly, other than the fiscal issues, I don’t see any difference in having Whitehall own 40 percent of HBOS than having Dubai own it.

    Except Dubai would drive a much harder bargain.

  • 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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