Royal Bank of Scotland's (RBS) loss did narrow dramatically on last year, but don't get too excited. That's mainly because 2008's loss reflected nearly £33bn of financial crisis induced write-downs, which thankfully wasn't repeated in 2009. But underlying credit quality continued to deteriorate last year and, amidst recessionary conditions, RBS' impairment charge jumped 85 per cent year-on-year to nearly £15bn.
Much of that relates to provisions in the so called "non-core" operation, which management says comprises assets in run-off or which have been designated for disposal. It's actually dominated by the dross that's left over from the bank's global banking & markets (GBM) division - around two-thirds of the group's impairment charge is concentrated in that unit.
RBS has also established a "core" unit - comprising those operations that aren't considered to be a total basket case. It mainly covers the UK retail and corporate arms, the wealth management side, the best parts of the GBM business, the US business, the insurance operation and Ulster Bank. Yet even there the bad debt charge rose 87 per cent to £4.7bn. True, the core unit's operating profit did jump 89 per cent to £8.3bn - but that's mainly because the now thoroughly cleansed GBM business turned 2008's £1.8bn loss into a £5.7bn profit. Virtually all of the remaining core units suffered earning declines - the UK retail arm saw profits slump 68 per cent to £229m. And the US division and Ulster Bank both made losses.
Still, now that RBS has been largely nationalised (it's 84 per cent state-owned), it's no longer short of capital and it reported a healthy 11 per cent tier one capital ratio. Not only does that fill the holes left by 2009's losses but, as chairman Sir Philip Hampton points out, it should also cover any "further charges we expect to make in 2010".
Prior to these figures, brokers' consensus estimates for 2010 were for a £2.9bn pre-tax loss, and a loss per share of 4.11p.
| ORD PRICE: | 39p | MARKET VALUE: | £ 21.8bn | |
| TOUCH: | 38-39p | 12-MONTH HIGH: | 58p | 18p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 138p | |||
| Year to 31 Dec | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) | |
|---|---|---|---|---|
| 2005 | 7.94 | 56.5 | 24.2 | |
| 2006 | 9.19 | 64.9 | 30.2 | |
| 2007 | 9.90 | 76.4 | 33.2 | |
| 2008 | -40.8 | -146.7 | nil | |
| 2009 | -2.60 | -6.40 | nil | |
| % change | - | - | - | |
