Banks’ losses at almost £10bn
Almost £10bn in losses are expected from the UK's part-nationalised Royal Bank of Scotland and Lloyds Banking Group later this week as the pair disclose grim results from a year of painful rebuilding.
Although the worst of the financial crisis has eased, RBS and Lloyds have been forced to shed thousands of jobs, raise tens of billions in extra capital and make plans to break up their business to soothe any European competition concerns.
The drastic surgery has come against the backdrop of the deepest recession in 30 years and the longest on record — which adds to the bad debts racked up as loans to businesses and homeowners turn sour.
RBS reported a record £24.1bn loss for 2008 and Thursday's figures are likely to reveal a further slide into the red in excess of £5bn last year amid bad debts and write-offs of around £13bn.
The investment banking arm — set to generate controversial bonus payouts for its staff — is likely to be one of the few highlights of the group's results as the economic turmoil sends shockwaves through other parts of the bank.
And although chief executive Stephen Hester still hopes to return the overall bank to profit in 2011, he has warned of a long and difficult recovery — saying that the economic fall-out from the recession “will take years to subside”.
Mr Hester has said he will forego his bonus for 2009. Eric Daniels, chief executive of Lloyds Banking Group, also announced he was waiving his £2.3m bonus for 2009.
The taxpayers’ economic stake now stands at 84% after RBS agreed terms with the Government over an insurance scheme for its toxic debts in November — which involved a further £25.5bn being pumped into the bank.
The revised terms of the Asset Protection Scheme (APS) heap far more of the first loss — like an insurance excess — on RBS to reflect gradually improving economic conditions, but the taxpayer has taken a big hit so far.
Based on current share prices, the public sector is around 30% — or £13bn — down on the £45.5bn it has pumped into the bank, with RBS shares trading at 35p compared with the average 50p paid.